In insurance, the claim settlement ratio should be a key consideration for those looking to purchase a policy. Often individuals overlook this aspect and focus more on policy premium and coverage as they are seldom aware of the meaning of claim settlement ratio and its importance in determining the effectiveness of a policy during the claim process.
Insurance policy claims are not guaranteed, this is why it is vital to pick insurers who have a history of settling a majority of claims they receive from their customers. In this regard, a claim settlement ratio serves as an indicator and allows individuals to gauge the likelihood of their claim getting settled in the face of an emergency.
To understand how the claim settlement ratio helps determine the merit of a policy provider, let’s explore its meaning and importance.
What is the Meaning of Claim Paid Ratio?
Claim settlement ratio can be described as a metric that shows the exact percentage of insurance claims that an insurance provider has settled in a given year. This ratio is also known as the claim paid ratio.
As a result, insurance companies with a higher claim settlement ratio, preferably above 90% are deemed more reliable in terms of settling claims at the last moment. In other words, insurance companies with a higher claim settlement ratio indicate the insurance provider has a better ability to settle a bulk of claims in a year.
Individuals typically take out insurance to build financial protection for their families in the event of unforeseen situations. In this regard, seeking a policy from an insurance company with a high claim settlement ratio offers individuals peace of mind thinking their family’s claim will be most likely settled during an emergency.
Every year the IRADI which is the apex regulator of all insurance companies in India publishes a report on the claim settlement ratio of all insurance companies operating in the country. This report offers a clear idea of the insurance providers’ performance in terms of settling policies. Every insurance provider updates this data on their official website for individuals to access and make an informed choice.
What Does the Claim Ratio Suggest?
An insurance company’s claim settlement ratio suggests the provider’s record of settling claims in a year. It is essentially the ratio of the total number of cases the insurance company settled in a year out of the total cases they received during the same period. This is why a high ratio suggests the provider settles a majority of the claims their customers raise. Alternatively, a low claim settlement ratio states that the insurance provider has rejected a large chunk of the claims it received in a year or has delayed the settlement process. So, checking the claim settlement ratio of the past few years of a company would enable individuals to understand their track of settling claims better and determine their reliability.
Based on this information they can pick a policy that will help them make a decision and enable them to understand what to expect from a provider. This is why, individuals are suggested to look for a company with a high settlement ratio to ensure their family can access the claim amount in full and quickly during an emergency without going through unwarranted delays or rejections.
To further gain the full picture, they must check the claim settlement process, the required documents, the terms and conditions binding claims, and exclusions in detail along with the settlement duration.
What Makes Claims Paid Ratio Important?
A high claim settlement ratio shows that the insurance company is reliable and would be more likely to have in place a robust risk management strategy. Checking the ratio beforehand would give individuals a sense of confidence and assure that their future claim will be resolved with the desired response and the policy beneficiary will access the promised sum in full and without delay.
Individuals must compare the ratio of different insurers along with their key features such as premium amount for the best ULIP plans, coverage, exclusions, payment schedule, and waiting period, if applicable to make an informed decision.
Skipping this is not advisable because a company offering lucrative features may have a low claim settlement ratio which is an indicator of the company’s inability to meet customer claims or a history of undisputed claims. In case of emergency if the insured or their family members will not be able to access the promised sum the entire purpose of selecting a policy with customer-centric features will be defeated.
This is why is it always advised to pick an insurer with a high claim settlement ratio and responsive customer service.
How to Check An Insurer’s Claim Paid Ratio?
Insurance Regulatory and Development Authority publishes an annual report on the insurance industry which features every insurer’s claim settlement ratio. The report offers a breakdown of their performance and offers insight into their –
- Total number of policies sold annually
- Total premiums received annually
- Total claims received
- Total claims settled
- Annual claim settlement ratio
Individuals may either check the ratio on the regulatory body’s official website or visit each insurance company’s official website to find details on the same. Individuals may ask their insurance agent about the same and request them to share details on it. However, individuals must cross-check and verify the details and read policy documents to avoid misselling insurance plans.
These aspects make it important for individuals to check the claim settlement ratio of insurance companies before buying a policy. They must check the ratio of the last couple of years to gain an understanding of their track regarding claim settlement and customer servicing. In addition, individuals should find out about the company’s review and the process of claim to understand how the same would play out in times of need. Based on the information, individuals can plan their insurance and build contingencies accordingly. This preparation can help them plan their approach better and make their dependents more financially aware and self-reliant the raise claims and access funds without hiccups.
