Purchasing a life insurance policy is not just about investing in a financial product but about giving your family peace of mind. However, one thing it usually neglects is the life insurance company’s claims settlement ratio. So why is this important, and what can it mean for you when you decide which is the right thing for you?
In this blog, we’re going to dive deep into why the claim settlement ratio is important to understand and what it can tell us about the company that has your life insurance in its hands.
What is Life Insurance?
Let’s quickly turn to it before we go on to the claims settlement ratio. Just quickly go through what is life insurance and how it works. The life insurance contract is between you and the insurance company. In exchange for paying regular premiums, the company promises to pay a lump sum to your beneficiaries in the event of your death. Life insurance is meant to keep your family financially stable after you die. Yet, if the insurance company doesn’t keep this promise, what good is it?
This then leads us to the topic of claims settlement ratio.
What is the Claims Settlement Ratio?
The claim settlement ratio (CSR) indicates the percentage of life insurance claims that an insurer can successfully payout from the total claims received in a financial year. For example, if an insurance company processes 1,000 claims and resolves 980 of them, its CSR would be 98%.
Typically, a trustworthy company has a higher claims settlement ratio. This means that the insurer is more prone to paying on claims ensuring that your family gets your intended financial support.
Why is the Claims Settlement Ratio Important?
1. Reliability of the Insurer
If you purchase life insurance, you expect that your family will get paid out when the time comes. The insurer’s reliability is measured by the claims settlement ratio. A company with a strong CSR track record finds themselves settling claims the most, so you can have assurance knowing your loved ones won’t be subjected to any unnecessary hassle when they file their claim.
If a company has a low CSR, you may also have more claims rejected, meaning if you’re fortunate enough to make a claim, your family could find themselves in a tough spot. A way to determine that an insurer is trustworthy is by looking at the claims settlement ratio.
2. Financial Security for Your Loved Ones
The main reason you have life insurance is to ensure a safety net if you pass away. Your family could, however, be left in a financially vulnerable position, and that’s mainly if the insurer is slow to settle claims or rejects a large proportion of claims submitted. The claims settlement ratio is very high, meaning that your beneficiaries shall get the payout as early as possible and without unnecessary hassles, which is the real purpose of the policy.
3. Trustworthiness and Transparency
Most often, the companies with high claims settlement ratios are more customer-centric and transparent. Clear claim procedures uniting legitimacy are granted. This creates trust between you and the insurance company and helps you with less fear of whether or not your policy will actually do any good for your loved ones in the future.
4. Faster Claim Settlements
A mega-high claims settlement ratio indicates a faster claims process. Claiming time helps for providing beneficiaries with immediate support via access to funds during a terrible time. However, if your family is grieving, the last thing they want is a long, drawn-out claims process.
5. Lower Chances of Rejection
Claims may be denied by insurance companies for some reasons, including inconsistent or missing information in the documentation. A low ratio of claims settled might mean that the insurance routinely denies claims, either for legitimate reasons or because of intricate internal procedures. A business that has a high claims settlement ratio is more likely to collaborate with claimants to find solutions than to just reject their claims.
Selecting an insurance company that has a track record of paying out on claims reduces the possibility that your family may be turned down at a time when things are already tough.
How to Use the Claims Settlement Ratio in Your Decision-Making Process?
Now that you understand the relevance of the claims settlement ratio, here’s how you can utilise this indicator to pick the proper life insurance company:
1. Find the Difference in CSRs by Different Insurers
Most insurance companies publish their claims settlement ratios annually, and regulatory reports such as those by the Insurance Regulatory and Development Authority of India (IRDAI) also contain such information regarding insurance companies. If you are doing a life insurance company comparison, look at CSR over the past few years. A consistently high ratio is a good sign that they are trying to settle claims.
2. Look Beyond the Numbers
A high CSR is important, but it’s also important to dig deeper into why claims were rejected. Some claims are rejected for legitimate reasons, such as providing fraudulent information or it hasn’t been disclosed if you have a medical condition. But if a company has a history of rejecting legitimate claims, that’s a red flag.
3. Take the Size of the Business into account
Also, a company’s size and market presence can shed some light on how to settle the claims. More resources and better infrastructure could mean big insurers in larger, well-established insurers can move claim processing along better. But don’t automatically reject smaller companies with a decent claims settlement ratio and the level of coverage you need.
4. Check for Customer Reviews
While the claims settlement ratio is a fantastic indicator of reliability, it doesn’t tell the whole story: you also should have a look at customers’ reviews to get a sense of how well the company does at handling claims. Are you happy with your claims process? Do they roll over, claiming it’s not their fault? Is the company responsive? Qualitative data about this can give you a taste of what to expect.
Conclusion
However, picking the right life insurance policy is not as simple as comparing premiums and benefits. You also have to take a fly at the insurer’s claims settlement ratio, as this is the vital indicator of their reliability and reliability to the fulfilment of the promises they make.
Depending on the policy, your choice of the high CSR ensures that your family will be able to avail the financial support you intended when you took this policy. Therefore, before choosing an insurance, take the time to analyse their claims settlement statistics and choose one with a solid track record. What good is life insurance, after all, if it fails to pay out when your family most needs it?