There are 24 life insurance companies in the market and each company offers a range of life insurance plans. The plans are competitive in terms of their coverage benefits and premium rates and so choosing the best life insurance plan might prove to be a challenge. You, therefore, need another parameter to judge life insurance companies. Claim settlement ratio is one such parameter which says a lot about an insurance company. Let’s understand what the ratio is and how it acts as a vital parameter –
What is the claim settlement ratio?
Claim settlement ratio is a ratio which shows the number of claims which the insurance company has settled against the total number of claims made on it. The ratio is calculated using the following formula:
Claim settlement ratio = (number of claims settled / total number of claims made) *100
Features of claim settlement ratio
Claim settlement ratio has the following features which should be kept in mind –
- The ratio is expressed as a percentage
- The ratio is calculated based on the claims settled in one financial year. There are different ratios for different financial years
- The ratios are calculated and published for all insurance companies by the Insurance Regulatory and Development Authority of India (IRDAI)
- The number of claims settled is calculated by the ratio. It does not depict the amount of claim settled by the insurance company.
Interpreting the claim settlement ratio
The claim settlement ratio gives you an insight into the claim settlement record of the insurance company. If the ratio is high it means that the company has settled most of the claims presented upon it. For instance, if the claim settlement ratio is 98%, it means that out of 100 claims, the company has settled 98 claims. A high ratio, therefore, indicates that the company fulfils its promise of claim settlement and is trustworthy.
Alternatively, a low claim settlement ratio is a bad sign. Companies having a low claim settlement ratio have higher instances of claim rejections or pending claims. This is bad for you, the customer because it jeopardises the chances of your claims being honoured.
So, when comparing life insurance companies, you should check the claim settlement ratio of each company. Companies which have a high ratio should be favoured because those companies are more likely to settle your life insurance claims than companies which have a low claim settlement ratio.
Things to remember
Though the claim settlement ratio is an important indicator of a life insurance company’s claim records, there are some things which you should keep in mind –
- The ratio considers the number of claims settled within a financial year. It does not depict the time taken by the insurance company to settle each claim. If the company takes a long time to settle its claims, it would be a drawback.
- The ratio does not indicate the number of claims pending with the insurance company.
- The ratio should not be the only parameter in judging life insurance companies. You should also judge the plans offered, their coverage benefits, premium rates, claim process and reputation of the company to choose the best life insurance policy.
Claim settlement ratio of life insurance companies
The following table shows the claim settlement ratios as well as the claim rejection ratios of all life insurance companies. Claim rejection ratio is the opposite of claim settlement ratio. It measures the number of claims rejected by the insurance company against the total number of claims made on it in a financial year. Let’s check both the ratios for a better understanding of the claim records of different life insurance companies. For term plans, term plan claim settlement ratio is checked but that is a part of the company’s claim settlement ratio. IRDA does not publish any specific data for term plan claim settlement ratio.
The claim settlement ratios are for the financial year 2017-18:
|Name of the company||Claim Settlement Ratio||Claim Rejection Ratio|
|Life Insurance Corporation of India||98.04%||0.67%|
|HDFC Life Insurance Company Limited||97.80%||1.66%|
|Max Life Insurance Company Limited||98.26%||1.72%|
|ICICI Prudential Life Insurance Company Limited||97.88%||1.77%|
|Kotak Mahindra Life Insurance Company Limited||93.72%||5.69%|
|Aditya Birla SunLife Insurance Company Limited||96.38%||2.80%|
|TATA AIA Life Insurance Company Limited||98%||2%|
|SBI Life Insurance Company Limited||96.76%||2.63%|
|Exide Life Insurance Company Limited||96.81%||3.04%|
|Bajaj Allianz Life Insurance Company Limited||92.04%||5.79%|
|PNB MetLife India Insurance Company Limited||91.12%||8.05%|
|Reliance Nippon Life Insurance Company Limited||95.17%||4.48%|
|Aviva Life Insurance Company Limited||94.45%||4.83%|
|Sahara India Life Insurance Company Limited||82.74%||8.48%|
|Shriram Life Insurance Company Limited||80.23%||17.80%|
|Bharti AXA Life Insurance Company Limited||96.85%||2.36%|
|Future Generali India Life Insurance Company Limited||93.11%||5.34%|
|IDBI Federal Life Insurance Company Limited||91.99%||7.49%|
|Canara HSBC OBC Life Insurance Company Limited||95.22%||4.54%|
|Aegon Life Insurance Company Limited||95.67%||4.33%|
|DHFL Pramerica Life Insurance Company Limited||96.62%||2.20%|
|Star Union Dai-ichi Life Insurance Company Limited||92.26%||6.53%|
|IndiaFirst Life Insurance Company Limited||89.83%||10%|
|Edelweiss Tokio Life Insurance Company Limited||95.25%||4.76%|
When you are comparing life insurance policies, do keep the claim settlement ratio of the insurance companies in mind. Compare the insurance companies on www.turtlemint.com with regards to their claim settlement ratios and choose a company which has the maximum possible ratio. You can compare and choose the best life insurance company on https://www.turtlemint.com/life-insurance and opt for the one which best suits your needs.