How important is a claim settlement ratio when opting for a term plan?

Insurance companies provide varying types of insurance policies offering wide coverage plans that appear flashy. However, to find the right plan, it is most important to check the insurer’s credibility. Checking the claim settlement ratio is a smart move to evaluate your insurer’s credibility while you are opting for a term plan. The rule says that the higher the ratio, the better the insurer’s credibility in settling claims. 

Let’s understand how the claim settlement ratio works and why it is important for you to evaluate the ratio before you finalise term insurance plans.

What is a Claim Settlement Ratio?

To begin with, the claim settlement ratio is the percentage of coverage claims that your insurer agrees to settle in a given year out of the total claims. Claim settlement ratio is considered a reliable metric to judge the credibility of the insurer. 

Let’s take an example to better understand—if the insurer promises 100 claims and has settled 80 of them, the CSR would be 80%, which is a good indicator. A settlement ratio that is closest to 100% makes for a reliable choice as it represents the insurer’s intentions to practically provide the claims that it promised on paper. 

The formula to calculate the settlement ratio is:

CSR= (total number of claims paid in a year/total number of claims raised in the year)* 100. 

Claim Settlement Ratio: Why is it Important?

Now that you have understood what is a claim settlement ratio, let’s explore its importance in being a parameter for the insurer’s credibility:

1. Builds Trust in the Company

A higher settlement claim ratio is an indicator of the company’s intention to provide claims at the time of need. Looking at the company’s ratio history to evaluate its policy of upholding commitments, a policy seeker can trust the company. 

2. Promises Transparency

In most cases, the company keeps its claim settlement ratio records open for policy seekers to examine which promises transparency. The settlement ratio of a company is published annually and can easily be accessed on the official website. 

3. Indicates Credibility

Words on paper hold more value when they can be used practically. A higher claim settlement ratio builds the credibility of the company in providing what it promised.  A claim settlement ratio indicates the goodwill of the company thus enhancing its credibility in the eyes of customers.

4. Idolises Customer: First Policy

The customer-first policy is more than a marketing gimmick. If the company has a reliable claim settlement ratio it suggests that the company honors the customer’s requirements by providing maximum claims at the time of need. 

Take a Look at Factors Affecting Claim Settlement Ratio

Multiple factors come together to uphold the company’s claim settlement ratio ensuring a proximity with 100% claim settlement. Here’s how a claim settlement ratio is affected:

1. Underwriting Practices

Underwriters appointed by a company have the responsibility of evaluating all the risks associated with a plan thus ensuring that the company is not offering more than what it can practically provide and also saving customers from getting scammed.

2. Claim Process

A reliable company like Life Insurance keeps the claim settlement process easy offering quick settlement that pushes the ratio to better numbers.

3. Customer Service

Customer service offers open communication for the insured person to clear their queries regarding claim settlements, quickly thus reducing the chances of unsettled claims. 

What is the Claim Settlement Process?

Every company follows a different method of settling the claim, however, to give you a general idea here’s a stepwise guide to the claim settlement process-

1. Report the claim from the official website of the insurance company

2. Fill in the claim form by submitting important documents and personal details

3. Wait for the company to verify your documents

4. The company will respond with an acceptance or rejection of your claims. Remember that the company has to give reasons for rejecting your claims in writing. In case your claim is rejected you can find out the reasons and take the required steps. 

The Bottom Line

The claim settlement ratio is a well-known metric for judging the company’s credibility and protecting customers from getting scammed into flashy coverage plans. As a smart customer, it is your responsibility you carefully evaluate and compare the settlement ratio of companies before opting for term insurance to ensure that you do not have to worry about practically enjoying the benefits of the plan.

Life Insurance promises a high settlement ratio as it upholds commitments to customers and promises a reliable safety net in times of need.

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