Life insurance is a crucial part of financial planning, offering peace of mind by ensuring that your loved ones are financially protected in the event of your untimely demise. One of the most important factors to consider when choosing a life insurance provider is the claim settlement ratio (CSR), which reflects the company’s reliability in honouring claims. A high CSR indicates that the insurer is consistent in settling claims, making it a trustworthy choice. Let us read in detail to know about it.
What is the claim settlement ratio?
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The claim payment ratio or CSR is a ratio derived by measuring the number of claims paid versus those filed. It is one of the most crucial ratios that each policyholder considers when selecting an insurer. In simplified math, it suggests that a higher claim settlement ratio indicates better performance of the insurance provider, i.e., the insurance company honouring the registered claims. One pro tip: before finalising your insurance policy and insurance provider, do not forget to review the Insurance Regulatory and Development Authority’s (IRDAI) annual publication of life insurers’ claim settlement ratios. Before making a decision, note that his ratio reflects an insurer’s reliability in resolving claims, so comparing ratios among different insurers is essential.
Importance of Claim Settlement Ratio in Insurance
Insurance is a promise to provide financial assistance during a loss, so it’s important to verify if the insurer will uphold this promise. The Claim Settlement Ratio (CSR) indicates the likelihood that the insurance company will settle your claim, giving you confidence in their reliability.
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How is CSR Calculated?
Calculating the claim settlement ratio is very simple. Using a mathematical formula, anyone can easily calculate the Claim Settlement Ratio (CSR). The following formula is used to calculate the CSR:
CSR or Claim Settlement Ratio of an Insurer is determined by the total number of life insurance claims settled by the insurance company in one single financial year as against the total number of life insurance claims received multiplied by 100,
CSR = (Claims paid / Claims received) in one year X 100
For example, in case the insurance company received 1,000 claims in a year and settled 900 of them, their CSR would be:
CSR = (900 / 1,000) X 100 = 90%
Reasons for Claim Rejection
Not all claims are approved, and insurers often have valid reasons for rejections. A CSR below 100% doesn’t imply unfair treatment of claims. It simply implies that there are certain reasons for the insurance company to reject the registered claim. Here are some common reasons for claim rejection:
- The claim was filed after the policy had lapsed.
- The claim pertains to an issue not covered by the policy.
- The claim form contained incorrect or misleading information.
- Relevant information, such as pre-existing conditions, was not disclosed.
- There was an unreasonable delay in submitting the claim.
- The claim requested coverage beyond what the policy provides.
- The claim was fraudulent, involving false information.
If you have furnished all accurate information at the time of policy inception, you do not need to worry about the CSR of the insurer as your chances of getting a claim would be higher. However, most people are worried about how term insurance claim settlement ratio matters, as it is a pure protection plan, and the claim could arise only when you are not around. Hence, the importance of accuracy in information becomes even more relevant in such cases.
The process to file a claim
The process to file a claim is defined by each insurance provider however it can be broadly described in the following steps:
- Report the claim to the insurance provider. The policyholder or the nominee can do so by reaching out to the insurance provider either via phone, SMS, website, by writing to the insurance provider or by visiting their office.
- Intimating the occurrence is the first step towards filing a claim
- Submit the necessary documents to the insurance provider. One can get the entire list of mandatory documents in the policy document or can get it from the customer service executive of the insurance provider.
- Once all the required documents are received, the insurance provider will start the process of claim settlement.
Things to know while filing a claim
Here are a few things that a nominee of a life insurance policy must know:
- Know the policy in detail, i.e. what is covered, inclusions, exclusions, the benefit to be received, etc. All these terms and conditions will help in a faster and easier claim settlement.
- In the event of the occurrence of the event, it is important to know that the nominee must file the claim at the earliest. A prompt conveyance of a claim helps in quicker claim settlement.
- Submit all required documents correctly for the faster and more successful settlement of the claim.
Thus, in this manner, one can do what is needed and get the claim settled quickly and successfully.
Conclusion
Selecting the right life insurance company is a critical decision that can significantly impact your family’s financial security. Companies with high claim settlement ratios assure that your claims will be honoured promptly and efficiently. By considering factors such as CSR, policy features, customer service offered by the insurer, personal future financial goals, etc, you can make an informed choice that aligns with your insurance needs. Ensure that you consult with a financial advisor to tailor your insurance coverage to your specific requirements, securing peace of mind for you and your loved ones.