Life insurance policy is important for all as it provides the policyholders a financial cushion against the life risks; it assures the financial safety of the family members. So, in this write-up, we address an important but understated aspect of buying a life insurance policy.
In India, the majority of life insurance policy buyers tend to make their buying decision based on the premium amount. People generally tend to choose a policy and an insurance company that offers the policy at the lowest premium. While the premium is an important factor to consider, as it has a long-term implication, most people fail to consider the importance of Claim Settlement Ratio of the insurer. This is mainly because not many people are aware of it. So, let us understand what it is and its importance.
What is the Claim Settlement Ratio?
A claim settlement ratio of an insurance organisation refers to the number of claims that the company has successfully settled as against the number of claim applications the company received over a period. The IRDAI (Insurance Regulatory and Development Authority of India) declares the claim settlement ratio of the insurance companies every year.
If you are a policyholder, and when you file for a claim, the life insurance company follows certain rules pertaining to the settlement of the claim. Not all claims are approved if they do not meet any policy requirements. So, you can use the claim settlement ration as a yardstick to measure if a certain policy is right for you.
How is CSR determined?
Claim settlement ratio is calculated by taking into account the number of insurance claims settled divided by the number of claims received.
For example, if the number of claims settled by the company is 90 and the number of claim applications received is 100 in a year, the CSR of the company will be:
CSR = 90/100 = 90%
Why is Claim settlement ratio important?
When you are looking to buy the best life insurance policy for your family, you must consider various aspects before zeroing down on the right insurer. You must consider the types of policies offered by the insurer, the quality of their services, the premium amount for the policy you wish to buy, and of course, the claim settlement ratio.
Here are vital reasons why you must not ignore the CSR?
- The life insurance policy a long-term financial product. You would have to premiums over a long period to avail the benefits of the policy. So, if for any reason, if you get your claim rejected in the future it can have a serious impact on your financial planning. The claim settlement ratio is a reliable way to ascertain if the insurer can be trusted to settle your claim application. A favourable ratio indicates that you can complete your insurance purchase with the said insurer.
- No matter the type of life insurance plan you wish to buy, you must ensure that you check the claim settlement ratio for that particular plan. It would be unfortunate and disappointing to have your claim rejected at the time of an unfortunate loss of a family member. So, as a policy holder, you must make sure that your family does not have to go through financial hardships because of insurance claim rejection. To avoid this situation, it is best advised that you buy a policy from a company that has a high CSR.
Thus, CSR is not only important to get your claim settled in a timely manner and get the necessary support you need in emergency, but also to ensure that your family is sufficiently protected if any unfortunate events leads to your demise.