Buying a term insurance plan is one of the key financial decisions that everyone must make in their lives. When it comes to choosing a term insurance plan, finding the right company from the 24 registered life insurers in India can be a daunting task. Various factors such as policy benefit, customer service quality, claim settlement ratio, etc., must be considered while choosing a company. Though the needs of everyone differ, a decision made based on these factors is likely to help an individual access the best product out there in the market.
The claim settlement ratio of a life insurance company is one of the major criteria used to ascertain the quality of a company. A good claim settlement ratio is an indicator that the company is financially solid and has the ability to honour the claims made by policyholders. The Insurance Regulatory and Development Authority of India (IRDA) releases the claim settlement ratio data of all life insurance companies in the market every year. Customers looking forward to purchase a new term insurance plan can consider this as a parameter when searching for companies. Before we take a look at the claim settlement ratio of major insurer, let’s understand how it is calculated.
Claim settlement ratio refers to the percentage of claims settled by a life insurance company compared to the total number of claims received. This metric is always given in percentage. For instance, if the claim settlement ratio of a company is 95%, it has settled 95 claims out of every 100 claims received. It can be calculated with the help of a simple formula as follows:
Claim settlement ratio = (No. of claims settled/No. of claims received) * 100
In the above example, the remaining 5% claims are rejected by the company. An insurer may reject a claim for various reasons including misrepresentation, fraud, impersonation, etc. It should be noted that the details must be filled correctly while filing a claim application. If the details provided are not sufficient, the company may ask the applicant to provide more details.
The claim settlement ratio of a company often provides a clear idea of the claims settled by it in a fiscal year. However, it should be just one of the factors to be considered while making a decision. Judging a company solely based on its claim settlement ratio is not a good idea. Other factors such as service quality, policy benefits, range of plans, etc., must also be considered while choosing a company.
The latest data for claim settlement ratio is available till the fiscal year 2016-17. As per the data released by the IRDA, the average claim settlement ratio of life insurance companies currently stands at 97.74% for the fiscal year 2016-17. This is marginally higher than the previous year’s claim settlement ratio of 97.43%.
India’s state-owned life insurance provider Life Insurance Corporation of India (LIC) is still the top company in the country with an exceptional claim settlement ratio of 98.31% in the fiscal year 2016-17.
The claim settlement ratio data for top life insurance companies can be listed as follows:
|Claim Settlement Ratio for Individual Policies (2016-17)|
|Insurer||Death claims received||Death claims paid||Claims rejected/repudiated||Claims written back||Claims pending||Claim Settlement Ratio (CSR)|
|Bharti Axa Life||878||811||33||0||34||92.37%|
|IDBI Federal Life||1,065||962||96||0||7||90.33%|
|India First Life||1,741||1,439||273||0||29||82.65%|
|Star Union Daichi||1,473||1,238||200||16||19||84.05%|
|Tata AIA Life||2,707||2,599||108||0||0||96.01%|
Claim settlement ratio is currently one of the best indicators available for customers to understand the quality of a life insurance company. Ideally, a company with over 80% claim settlement ratio is considered a good one since it has honoured most of its claims. A company might have genuine reasons for rejecting a claim. Hence, it is better to consider other factors too before narrowing down the choices to one specific company. Compare the pros and cons of various company and choose the best one that meets your requirements.
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