Claim Settlement Ratio For Life Insurance

What is the Term Life Insurance Claim Settlement Ratio?

Checking the claim settlement ratio is very important before buying a life insurance plan, as it indicates how many claims the insurer has settled in a given financial year against the total number of claims received by them.

The claim settlement ratio of life insurance companies is calculated as a percentage, and it is calculated separately by every life insurer to showcase their claim settlement ability in a financial year. The report containing the CSR of all the insurers is released by the insurance regulator, IRDAI, on an annual basis after each financial year.

A life insurer with a CSR of more than 90% is considered reliable, and companies with more than 95% CSR are known to be the best for buying a life insurance product.

The List of Claim Settlement Ratios of Life Insurers in India for 2024-2025

Here, we have listed the claim settlement ratios of life insurers in India as reported in the latest 2024-25 financial year reports released by the IRDAI.

In the above report:

• The Claim Settlement Ratio denotes the percentage of claims settled by the given insurers in the year 2024-25.
• The Solvency Ratio denotes the excess assets over liabilities of a life insurer and is mandated to be at 1.5 by the IRDAI.
• Axis Max Life Insurance Limited recorded the highest Claim Settlement Ratio at 99.70%.
• Bajaj Life Insurance Company Limited recorded one of the strongest solvency ratios at 3.59.

How is Life Insurance Claim Settlement Ratio Calculated?

As explained, the claim settlement ratio is a percentage of the total number of claims settled by the insurer out of the total claims received throughout a financial year. Please note that the CSR is calculated for all the insurance products offered by the insurer, not for individual products.

Let's understand how a CSR is calculated through the following example:

An insurance provider, 'X', received a total of 1,400 death claims during the financial year from 1 April 2022 to 31 April 2023.

The insurer settled 1,360 death claims; 20 claims were rejected, and the remaining 20 have not been settled yet.

• In this case, the CSR of the insurer for its company is (1,360/1,400)*100 = 97.14%.
• The claim rejection percentage or claim repudiation ratio is (20/1,400)*100 = 1.4%.
• The claim pending ratio is (20/1,400)*100 = 1.4%.

It is important to understand that claims are usually rejected due to misinformation provided by the life assured (policyholder), fraudulent activities, or incomplete/incorrect paperwork by policyholders.

What is Term Insurance Claim Settlement Ratio (CSR) by Number?

Suppose the company settled 950 claims out of 1000 claims received in a particular year. This 950 represents the claim settlement ratio by number. The higher the number of claims a company settles in a particular year, the higher its claim settlement ratio. A good claim settlement ratio shows a company's efficiency in settling received claims.

What is Considered a Good Claim Settlement Ratio?

Simply put, the higher the claim settlement ratio, the more trustworthy the insurer is. Generally, a CSR above 90% is considered good, and it means the insurer is financially secure. If the CSR of an insurance provider is more than 95%, then it is believed that the insurer is excellent at settling insurance claims and is very reliable for buying an insurance plan.

Why is Life Insurance Claim Settlement Ratio Important?

Choosing the insurer with the highest claim settlement ratio in life insurance is important because after your demise, you won't be there to sort out any issues that may arise regarding the settlement of your life insurance claim. Choosing an insurer with a good record can ensure that the death benefit will reach your nominees on time. This can also be ensured by being truthful with the information that you provide, and filling the paperwork accurately and completely.

Apart from CSR, you can consider other factors to check insurer reliability before making any decision:

• Online reviews
• The experience of other policyholders you know
• Solvency Ratio
• Annual premiums
• Assets Under Management
• Product portfolio
• The features of a life insurance policy

Types of Life Insurance Claims

There are two types of life insurance claims: Death claims and Maturity claims. To learn more about these claims, check out the subtopics below:

1. Death Claims

   In the event of a policyholder's unfortunate death, their nominee can submit a death claim. The insurer will pay out the life cover to the nominee. To file a claim, you must inform the insurance provider of the policyholder's death with the necessary documents. The death benefit amount is tax-free under Section 10 (10D) of the Income Tax Act.

2. Maturity Claims

   Maturity benefits are the sum assured along with bonuses given to policyholders when they survive the policy tenure. In order to claim the maturity benefit, the insured person must fill out a necessary discharge form and submit it to the insurer. Moreover, the maturity benefit is tax-free under Section 10 (10D) of the Income Tax Act.

Documents Required for Life Insurance Claim Settlement Process

During the claim process, nominees must submit the policy document, death certificate, and claim form. Specifically, to claim the death benefit, the following documents are required:

• Completely filled and signed claim form.
• Original policy documents.
• FIR.
• Post-mortem reports.
• Death Certificate.
• Nominee's personal ID proof.
• Nominee's address proof.
• Hospital records.
• KYC documents (e.g., photo ID copy, address proof).
• Bank details.
• Cancelled cheque.
• Other documents as required by the insurer.

Factors That Affect The Claim Settlement Ratio of Life Insurance Providers

There are some factors that may affect the insurer's overall claim settlement ratio. For instance, if the claim is rejected due to misrepresentation or fraud by the policyholder, it will also affect the insurance provider's overall CSR.

• Non-disclosure

  Non-disclosure is a common reason that can affect an insurer's overall CSR. People often do not disclose pre-existing health conditions to the insurer to reduce the premium amount. While this might reduce premiums, it will negatively affect dependents at the time of claim and may even lead to claim rejection. In such cases, the insurer may reject the claim.

• Fraud

  If policyholders intentionally submit incorrect documents, and the insurer becomes suspicious about their authenticity at the time of claim submission, this can lead to claim rejection, impacting the overall CSR.

• Nomination update error

  Sometimes, the insured person forgets to change or update the nominee if something happens to the initially selected nominee. This can lead to delays in the claim settlement process.

Conclusion

Hopefully, your doubts regarding the claim settlement ratio are now cleared. Now, you are aware of the importance of checking the CSR while buying a life insurance policy. By checking the CSR, you can be sure of the insurer's reliability. It also gives you peace of mind about your nominee's financial future.

If you are confused about which term or life insurance plan is best, you can visit PolicyX.com or call us at 1800-120-0269. We offer No Spam, No Gimmicks, and Only Expert Insurance Guidance.