Why is looking at the term insurance Claim settlement ratio important?

a magnifying glass sitting on top of a piece of paper

Most of us expect protection from our term insurance plans, but what happens if your family doesn’t receive the necessary support and insurance payouts after you pass away? It can be the worst feeling possible and a significant financial hardship if your beneficiaries are totally dependent on the insurance proceeds. After all, we purchase a term insurance plan with the belief that the provider will provide the sum Assured amount to our loved ones in the event of our untimely death. In such a scenario, having term insurance plans from a company that has the highest settlement ratio might ease the burden of processing a claim.

The claim settlement ratio, which measures a company’s dependability in terms of how quickly it settles death claims, is what every policyholder needs to look at before selecting the right insurance company. The number of claims that an insurance company approves in a given year is known as the claim settlement ratio. This ratio provides a clear picture of how many claims the company has resolved relative to the total number of claims it has received during a given period of time.

Evaluating the Claims Settlement Ratio

The claim settlement ratio is a useful metric for evaluating how well an insurer handles claims. For the following reasons, the claim settlement ratio is unquestionably very important to consider when choosing an insurance provider:

Reliability: A high ratio indicates that the insurance has a track record of keeping its word to policyholders and honouring claims. This encourages confidence that your loved ones won’t experience uncertainty in trying times.

Past five years’ ratio: Analysing the trend of this ratio over a time frame, usually five years, provides insightful information that goes beyond what can be learned from data collected in a single year. It reveals how consistently the insurance honours claims over an extended period of time. A consistently high claim settlement ratio over the previous five years indicates a solid track record of commitment.

Consistency: It’s important to maintain consistency because trends can reveal shifts in this ratio over time. An ascending trend indicates that the insurer is actively improving and becoming more efficient with its claim settlement procedures. On the other hand, a declining trend can point to possible issues and call for additional research.

A higher ratio—almost 100%: It shows policyholders how effective the insurance business is at handling claims, thereby fostering confidence in the mind of a buyer. Policyholders feel secure knowing that the insurer can expeditiously handle and approve legitimate claims.

Accountability and transparency: Reputable insurance companies with strong claim histories understand that their claims settlement percentage is a selling point. Displaying the claims settlement ratio is a sign of the business’s dedication to openness and responsibility. Customers are empowered to make decisions based on real information rather than just empty promises.

Credibility: Insurance companies with continuously high ratios demonstrate they are financially stable. This shows that they have the tools and procedures needed to manage claims effectively, which is enough to give peace of mind to their policyholders.

Client-centric approach: An insurance company’s commitment to client satisfaction is often indicated by a high claim settlement ratio. The higher ratio also indicates they give centre priority to the family during critical times.

How should we interpret the date?

The information on claim settlement ratio can be understood in the following ways:

If the insurance company you have selected for 1 crore term insurance has a CSR above 80%, it is considered a good ratio to begin with. Examine the company’s typical claim settlement time as well. This is a very good measure of the company’s process efficiency. Anything under 30 days is considered good, and anything under 20 days is outstanding.

Do not read too much into the pending claims; they may be the result of legitimate causes. The average value of a paid claim will increase in tandem with increased term insurance plans sale.

It is found that the majority of claim denials occur within the first two years of insurance. In the context of life insurance, these are called early claims. Compared to established life insurance companies, startup insurance companies tend to have more early claims. The claim settlement ratio for newer companies is thus lower.

When purchasing term insurance plans, use the claim settlement ratio as a filter. Even if it’s advisable to choose a firm with a high claim settlement percentage, rejection of your claim is still a possibility.

So, how can you make sure that your claim is not refuted?

There are a few things you can do to use the benefits of your coverage without having to deal with a denied claim. Everything begins when you buy an insurance policy and put your signature on the document. At that time, the insurance company would assess the risk you pose and modify the underwriting of the policy as necessary. To provide a seamless claim settlement process, the following steps can be carried out:

Make full disclosure of your details when buying 1 crore term insurance. If you don’t tell the insurance company about any past medical conditions or your smoking history, the insurer will assess your risk differently. If the insurance company finds out about this at the time of filing a claim, it can be rejected.

The policyholder ought to be acquainted with the insurance application and, if possible, complete it on their own. Getting the insurance agent to complete the form is not a favourable practice. The agent can overlook something on the form or be unaware of the customer’s sensitive information.

During the free-look period, the buyer should go over the policy papers to make sure all of the terms and conditions meet their expectations. If for any reason the policyholder is dissatisfied with any of the terms, the policy may be returned to the insurer for a refund.

The buyer must notify the nominee as soon as they have purchased the policy. Should an occasion come up where the nominee needs to file a claim under the policy, he or she should adhere to the established procedure for doing so. The claim settlement process moves more quickly if the claim is filed appropriately.

Where do you find the claim settlement ratio?

On a business website, the claims settlement ratio is typically shown in a prominent manner. It can be found in sections like “About Us,” “Investor Relations,” or places dedicated to firm performance indicators. Moreover, insurance businesses regularly produce annual reports and comprehensive financial reports that incorporate these statistics. Furthermore, industry regulators like the Insurance Regulatory and Development Authority of India (IRDAI) typically publish yearly reports on the insurance market that include the claims settlement ratios of certain insurers.

So, we are saying

Now that one can buy and compare term insurance policies online easily, it is easy to select one that comes with a low premium rate. However, it is important to understand that a family member’s untimely demise can cause significant emotional and financial hardship for the surviving members of the family. Hence, when you are taking different parameters into consideration, the claim settlement ratio should be given the top priority. A company’s claim ratio should always be checked before purchasing term insurance plans or any other insurance plan, as it is a useful metric for assessing an insurance provider’s dependability. Insurance companies having a low percentage of claim settlements may find a way to avoid processing claims. The majority of financial consultants advise their customers that they should prioritise the claim settlement record of the particular insurance company over the premiums they are charging.