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Claim settlement ratio: meaning and importance

9 Mins 22 May 2023 0 COMMENT

Insurance plans aim to shield you from unforeseen financial risks, but this protection only becomes effective after a claim is accepted and settled. So, it is crucial to obtain insurance coverage from a reputable company that has a high claim settlement ratio. Here, we will discuss what is claim settlement ratio and the process to avoid claim rejection.

What is a Claim Settlement Ratio?

The Insurance Regulatory and Development Authority (IRDAI) issues all life insurers’ claim settlement ratios each year. The Claim Settlement Ratio meaning implies the proportion of claims settled by an insurance company against the total number of claims received in a financial year. It is calculated by dividing the number of claims settled by the total number of claims received.

For instance, if an insurance company receives 100 claims and settles 90 of them, the claim settlement ratio would be 90%. A high claim settlement ratio indicates that the insurer has a good track record of settling claims, and policyholders can trust them.

The given formula can calculate the claim settlement ratio:

CSR = Total number of claims in a year x 100

Significance of Claim Settlement Ratio

The health insurance claim settlement ratio is an essential factor to consider when choosing an insurance company.

  • A high claim settlement ratio indicates that the insurer has a high rate of settling the claims received and thus, can be reliable and trustworthy.
  • It also assures the policyholder that their claim will likely be settled promptly and efficiently.
  • Apart from that, a high claim settlement ratio also helps to build a good reputation for insurance companies. The more satisfied consumers they have, the more probable they will draw in new ones.

Setbacks of Claim Settlement Ratio

A high claim settlement ratio does not necessarily mean an insurance company is good. This ratio has some restrictions that you should be aware of.

First, the claim settlement ratio does not indicate the time to settle a claim. Even if an insurer settles a high percentage of claims, if the settlement process takes too long, it could cause inconvenience and financial strain for the policyholder.

Second, the claim settlement ratio figure is in percentage and not a number. Hence, it does not reveal clearly the actual number or how many claims have been rejected by the company. For instance, if an insurance company rejects 10 claims out of 1,000 claims received, its claim settlement ratio will be 90%. However, in the next year, it receives 500 claims and rejects 25 claims. Here, its claim settlement ratio will rise to 95%, but it has rejected more claims.

Claim Settlement Process

The claim settlement process starts with the policyholder filing a claim with the insurance company. Then the insurer verifies the claim to determine its validity. If the claim is deemed valid, the insurer will settle the claim by paying out the sum assured to the policyholder.

However, if the insurance denies the claim, they must do so with good cause.

The policyholder can challenge the ruling and offer more proof to back up their case.

How to avoid our claim getting rejected?

In many instances, your claim can get rejected. To avoid such circumstances, make sure to check the following steps.

Disclose all relevant information: While buying an insurance policy, you must disclose all relevant information, such as pre-existing medical conditions, to the insurer. Failing to do so could result in your claim being rejected.

Understand the policy terms and conditions: Before filing a claim, make sure you understand the terms and conditions of your policy. This will help you avoid filing claims for events that are not covered under your policy.

Provide accurate information: When filing a claim, make sure that all the information provided is accurate and complete. Providing false information or omitting information could result in your claim being rejected.

File the claim promptly: As soon as you become aware of a loss or damage, you should file a claim promptly. Delaying the claim could result in your claim being rejected.

Summing it up

The claim settlement ratio is an essential factor to consider when selecting an insurance company. It provides an indication of the insurer’s reliability and trustworthiness.

However, policyholders should not solely rely on the claim settlement ratio while considering insurance policies. It is crucial to understand the terms and conditions of the policy and follow the claim settlement process to avoid claim rejection.

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