Term Plan Claim Settlement Ratio

About Term Plan Claim Ratio

What is the Claim Settlement Ratio in term insurance?

The claim settlement ratio (CSR) in term insurance is the total number of claims approved by the insurer against the total number of claims received in the financial year. This ratio is measured every year and the said details are available on the official website of the insurer.

Know that the claim settlement ratio is calculated for all insurance instruments and is not specific to term insurance only. To understand the claim settlement ratio, consider the following example.

Let us assume that the insurer received 1000 claims in the given financial year. Out of the 1000 claims, the insurer settled 950, rejected 40, and are yet to decide the fate of the remaining 10 claims. Now, to calculate the claim settlement ratio, the formula used is as follows –

Claim Settlement Ratio Formula And Calculation

Claim Settlement Ratio = (Number of Claims Settled / Number of Claims Received) x 100

Based on this information, the claim settlement ratio of the insurer will be 950/1000 = 95%. Similarly, the claim rejection ratio will be 40/1000 = 4%, and the claim pending ratio will be 10/1000 = 1%.

Importance of the Claim Settlement Ratio

According to the Insurance Regulatory and Development Authority of India (IRDAI), the claim settlement ratio is published as a percentage every year. When you compare term insurance policies before purchase, you must have access to the claim settlement ratio of the shortlisted insurers. This way, you will be able to choose the best term plan in the market.

Also, make a note that the claim settlement ratio is not only applicable to the term insurance plan but is considered as an essential parameter for other insurance instruments as well.

What Happens If You Don’t Buy Term Insurance From An Insurer With The Best Claim Settlement Ratio?

When you purchase term insurance from an insurer with a low claim settlement ratio, you are bound to face the following issues.

● Claim Rejection

One of the most obvious risks that you (the policyholder) will face is the rejection of your claim request. Now, as we know, term insurance is purchased to protect the dependents in the event of the policyholder’s sudden death. So at the time of raising the claim request, the policyholder will no longer be around to help the dependents with the claim process. During such a challenging time, if the claim is rejected, the dependents will have no financial security.

● Your Family Might Face A Financial Crisis

If the term insurance claim is not settled, then your family is bound to face financial turmoil. Now, for those who are the sole income earners in their family, this situation will leave the dependents with no source of income. Furthermore, you will no longer be around to help your family in such a crisis.

● Nobody to follow-up on the Claim Request

A term insurance claim is raised only after your (the policyholder’s) death. So, in case the claim is rejected, someone from the family should be aware of the follow-up process.  They need to be well versed with the claim settlement process so that the insurer pays the compensation to your dependents in time.

Factors influencing term insurance Claim Settlement Ratio

The following are certain actions or events performed by potential customers of the insurance provider can in turn have an impact on the claim settlement ratio of the insurer.

● Non-disclosure

When buying insurance, it is essential to share valid information with the provider. Any health-related concerns should be mentioned when buying the policy. In case you happen to hide certain adverse conditions that you may be suffering and the insurer finds out about it later, it can impact your insurability and claim rejection. Hence, non-disclosure can have a negative impact on CSR.

● Fraud

 If the insurer suspects any fraudulent activity or the authenticity of the policyholder, it may end up rejecting the claims made. Thus, this will affect CSR negatively.

● Ignorance of the policyholder

At times, the policyholder may not understand the terms and conditions mentioned by the insurer. Although that is quite unfortunate, it is always recommended to go through the contents of the policy carefully before buying it. Any slight inconvenience or misunderstanding in the policy needs to be addressed immediately before it impacts the CSR.

● Nomination update/mistake

 In case the policyholder fails to mention any nominee in the policy, it will have an impact on the insurer. This is because when processing the claim made, the insurer will have difficulty in determining the legal heir. No claims will be settled in case there are disputes regarding the nominee.

Claim Settlement Ratio of Bajaj Term Insurance Plans

As per the Insurance Regulatory and Development Authority of India (IRDAI), 2018-19 data, the claim settlement ratio for Bajaj Term Insurance Plans is 95.01%.

Conclusion

When buying term insurance, you should be aware of the claim settlement ratio of your chosen insurer. It is one of the best parameters to determine the reliability of the insurer and their products. You should ideally choose an insurer with a CSR of over 80 per cent.

Along with the CSR, other factors such as the benefits and features offered, the premiums charged, and the exclusions of the policy should be taken into consideration when buying term insurance. Compare different policies online based on these factors and then choose the one that best suits your needs.

If you are looking for term insurance to secure your family’s future, consider buying the Bajaj Allianz Smart Protect Goal Term Insurance at Finserv MARKETS. With this plan, you can avail a host of term insurance benefits and features such as comprehensive coverage of up to Rs. 1 Crore, add-on covers to suit your needs, affordable premium rates, and more.

Also, you can use the term insurance calculator available on Finserv MARKETS to determine the premiums charged on the opted coverage and rider benefits.