Term insurance plans are the simplest kinds of life insurance. They offer death benefits in case of the policyholder’s demise. Since they are pure life covers, they are the most affordable kind of life insurance too. But before you buy a term insurance plan, there are many factors that you need to look into.
Things like the amount of coverage, the premium and the add-on riders are all important areas to look into. Additionally, before buying term insurance, claim settlement ratios of the insurance providers also need to be factored in.
Every year, insurance companies receive thousands or even lakhs of claims on the policies purchased from them. Not all these claims are settled. Some claims are rejected for valid reasons such as fraudulent requests, policy lapses and more. Other claims may be rejected because the insurance provider is not reliable.
A claim settlement ratio (CSR) is the percentage of the total claims received during a year that they settle. It can help you determine how reliable the company is, when it comes to settling claims. As a general rule of thumb, the higher the claim settlement ratio is, the better it is for the buyer of the insurance plan.
Before you buy a term plan, claim insurance ratios are one of the top things you should look into. This helps you find the right insurance provider for your term insurance needs.
The claim settlement ratio is calculated using a very simple yet effective formula. Check out the formula below.
Claim Settlement Ratio = (Total number of claims settled in a year ÷ Total number of claims received during the year) x 100
As you can see, the claim settlement ratio is expressed as a percentage. This makes it easier for you to compare different insurance providers. Let us take the following hypothetical data to understand how the CSR is calculated.
During the year 2021-22 -
Number of claims received = 2,00,000
Number of claims settled = 1,92,000
In this case, the claim settlement ratio for the insurer will be 96% (i.e. 1,92,000 ÷ 2,00,000 X 100).
The primary reason you purchase a term insurance plan is to ensure that your loved ones have a financial safety net in your absence. This financial safety net only comes into effect when the insurer pays out the death benefits to your nominee. And to receive the death benefits, your nominee must file a claim with the insurer.
If the insurer does not have a good track record of settling claims, it will be harder for your family to get the financial benefits from your term plan. So, before you purchase term insurance, claim settlement ratios of different insurers must be compared. This way, you can find the insurance provider that will ensure your family’s genuine claim is promptly settled.
Timely settlement of claims is also important because it will be easier for your family to meet their immediate financial needs without any stress. Their day-to-day expenses will be taken care of, as will their life goals.
It is not possible for you to calculate the claim settlement ratio for every insurer manually. The details needed will not be easily available. Fortunately, there are a couple of easy ways to check the claim settlement ratios online. Check them out below.
Every year, the Insurance Regulatory and Development Authority of India (IRDAI) computes and releases the details of the claim settlement ratio of insurers. You can head to the IRDAI website and check the details of the CSR in the Annual Report for the relevant financial year.
Most insurance companies also typically publish their claim settlement ratio on their website. So, if you want to check out the term insurance claim settlement ratio data, you can visit the website of the insurance provider itself.
There are also some other key things you need to keep in mind about the claim settlement ratio of an insurance provider.
The claim settlement ratio changes every year.
You need to check the CSRs for at least the last five years, to get a good idea about the insurer’s track record.
The claim settlement ratio should be consistent over the past few years.
The ratio is calculated for all the insurance products offered by a company, such as term plans, ULIPs, savings plans etc.
In the claim settlement ratio, also check the total number of claims received by the company to gauge its size and popularity.
To sum it up, it is very essential to look into the claim settlement ratio of your insurance provider before buying a term plan from them. Your family and your loved ones will be glad you looked into this crucial factor in case they need to raise a claim on your term insurance plan.
If you are looking for comprehensive term plans from the most reliable insurance providers, you can head to Finserv MARKETS to check out your options. Once you have found the right term plan for your needs, you can make your purchases through a hassle-free online process.
Yes, the claim settlement ratio of insurance providers changes every year. It is calculated annually and released for public use.
The higher the claim settlement ratio, the better. Typically, a claim settlement ratio of 95% or higher is considered ideal. So, when you are buying term insurance, claim settlement ratios of 95% or more indicate reliability.
The claim settlement ratio is calculated as a percentage. It is the ratio of the total number of claims settled in a year to the total number of claims received during the year.
If you plan to buy a term plan, claim settlement ratios for term insurance providers can be found on their website. Alternatively, you can also check the IRDAI website, since the insurance regulator issues the data about the CSRs of all insurers in India each year.
The claim settlement ratio is important because it tells you about how likely the insurance provider will be to settle your insurance claim or your nominee’s. The higher the ratio, the more reliable the insurance company is considered to be.