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Why Should You Check Claim Settlement Ratio While Buying Life Insurance?

Do you plan to buy a life insurance policy and Claim Settlement Ratio are scouting around to find the best plan that promises comprehensive coverage at the best rate? You are constantly checking the features and premium rates for the plans. While you do all this, stop and ask yourself these 4 questions:

  • Why am I buying this life insurance policy?
  • Is getting the lowest quote/price my only objective?
  • What is the proof that whatever the company is promising is what I will get?
  • Can I overlook insurer’s track record while buying life insurance and simply buy from the most popular life insurance company?

Most of us tend to look for lowest rates when it comes to purchasing life insurance. However, what matters really in case of a life insurance policy is:

  1. Whether the company can fulfil the promised claim in case of death of the policyholder
  2. How fast does the insurer process the claim?

Here claims settlement ratio can play a crucial role. It reveals the ease and speed of claim settlement with insurers.

The Claim Settlement Ratio

Claim settlement ratio (CSR) refers to the number of claims paid by the insurance companies from the claims that it receives. It is the total number of claims approved divided by the total number of claims received by the insurer in a particular financial year. For example, if an insurance company receives 100 claims in a year and out of that 60 are settled, the claim settlement ratio will be 60%.

Let us look at the CSR of the top life insurers for 2016-17:



Insurance Company

Claims Paid 2016-17

Max Life




PNB Met Life







Source: IRDAI Annual Report

Max Life has a high claim settlement ratio. It means, the insurer is honouring the maximum number of claims as compared to the other insurers.

The Speed of Claim Settlement

It is essential for an insurer to have a robust claim settlement process in order to consistently maintain a high claim settlement ratio. Some measures which a life insurer can take towards expediting the claim process is appointing a dedicated relationship officer, offering an online interface to file claims, etc.

For instance, Max Life has introduced ‘Insta claim’ feature to ensure that all claims on the eligible policies are settled within one day of receiving the claim along with necessary documents. Insta claim is available to registered beneficiaries in which the polices are active for minimum three years and the claim amount is less than Rs 25 lakh and doesn’t require any field verification.

Note: The necessary documents should be submitted before 3 pm on any working days (Monday-Friday) in any of Max Life offices. (Source: The Times of India). This feature has simplified the claim process and also lowered the outstanding claim ratio as well. As it is evident from the following image, Max Life has only 0.03% of total filed claims remaining to be settled.

Outstanding Claim Ratio

Source: IRDAI Annual Report

Claims Repudiation Ratio

This ratio indicates the share of total filed claims that were rejected by the insurer in the financial year. Therefore, any claim that remains with the insurer has either been rejected or will be accepted by the insurer.

Now, if you look at those insurers who were showing 0% outstanding claims at the end of financial year, you will find that they are rejecting the claims (as per the below image) in higher numbers. This may not be a good sign for policyholders.

Source: IRDAI Annual Report

Benefits of High Claim Settlement Ratio

You are buying insurance for the financial security of your loved ones, and a high claim settlement ratio makes it possible. A high claim settlement ratio indicates that more claims are being paid out which means that the insurer’s underwriting rules are moderate, and the insurer is settling claims without hurdles.

As a customer, it is in your best interest to choose a company with high claim settlement ratio, not only because it will ensure the financial security of your loved ones but because you are actually dealing with a life insurance company that respects you as an individual.

Wrapping Up

Remember that your purpose of buying a life insurance policy is to give financial security net to your loved ones. However, the purpose is defeated if the insurer has a high rejection rate or a lengthy, time-consuming claim process. As it is said, “A friend in need is a friend indeed”, make sure your life insurer is there to help you when you need it most.

Though the price is a critical parameter, look at price along with the claim settlement ratio to make a better choice. After all, an insurer that either rejects or delays the claim, is worse than having no insurance policy.

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