When you are planning to buy a life insurance policy, you must look at the various aspects of the insurance companies you have shortlisted. The process of securing the future of your loved ones with well-designed life insurance plans can be successful only if the insurer is reliable and trustworthy. Get detailed information about various types of insurance policies, on this website: http://www.blogmoney4u.com
One vital factor that can help you in this regard is the claim settlement ratio. If you have browsed the websites of insurers or read blogs on life insurance, it is likely you may have come across this term. What is the claim settlement ratio and why is it important when buying life insurance? We provide the answer in this article.
Understanding claim settlement ratio (CSR)
The CSR is essentially a ratio that is calculated by taking the total number of claims settled by an insurer within a period and comparing it with the total number of claims received by the company in that period. The figure is then multiplied by 100 so that a percentage is achieved.
The formula for CSR is as follows:
Total number of claims settled by the company/total number of claims received by the company x 100 = Claim Settlement Ratio
For instance, XYZ Ltd. is an insurance company that sells different types of life insurance plans. The company received 150 claims in the year 2021. Out of these 150 claims, a total of 140 claims were settled. Hence, the claim settlement ratio for XYZ Ltd. for the year 2021 is 93.3%.
Every year, all registered life insurance companies’ claim settlement ratios are presented by the Insurance Regulatory and Development Authority of India (IRDAI).Hence, insurers cannot claim otherwise on their website or brochures.
Why is the claim settlement ratio important?
Now that you know what the claim settlement ratio is, let’s understand the role it can play when buying life insurance plans.
The CSR is an indicator of the insurer’s dedication
One of the biggest markers of the reliability of an insurance company is the claim settlement ratio. The claim settlement ratio helps you get a better understanding of how dedicated the insurer is when it comes to settling the claims of its policyholders. If the claim settlement ratio is high, it shows a high willingness on the part of the insurer to settle policyholders’ claims.
The CSR means higher chances of claim approval
Different types of life insurance plans have different types of claim processes. Regardless, it is crucial that, when you or your loved ones raise a claim on your policy, the chances of it getting approved are high.
Most importantly, you do not want the claim raised by your family to be rejected during difficult times. This may be the time when they need financial help the most. A high CSR ensures to a great degree that your family receives their rightful dues.
The CSR is an indicator of the company’s financial stability
If the CSR of an insurer is high, it indicates that the company is financially stable. A high CSR implies that the insurer not only settles the claims of its policyholders on time but also pays them their dues.
Other factors to keep in mind
The claim settlement ratio is an important factor to be kept in mind when buying life insurance. However, it is not the sole factor. We list down some other vital things you need to keep in mind:
The balance between premium and coverage
Just because a plan is low-priced does not mean it is an ideal plan. You must compare the price with the coverage and tenure being offered. A great way to understand the connection between coverage, tenure, and premium is the life insurance calculator, which gives a premium estimate based on the former two variables.
Whether it is during the tenure of the plan or during a claim settlement, your queries and doubts as a customer should be addressed effectively. Therefore, a company with dedicated customer service should be chosen.
The claim settlement process
Along with higher chances of claim approval, you would also want an easy and quick claim settlement process that does not consume much time or energy.
In order to determine the likelihood that a claim will be approved when you purchase a life insurance policy, it is crucial to look at the company’s claim settlement ratio. Additionally, other factors, such as customer service, premiums, and tools, such as life insurance calculator, must be considered as well.