The life insurance company would pay a lump-sum amount (called the sum assured) to the policyholder’s beneficiaries in the case of the insured’s death in exchange for a specific number of or regular premium payments over a particular period of time. The death benefit paid as a lump sum provides financial assistance to the insured’s family in trying times.
In some cases, insurance providers may not be able to settle a claim for various reasons, and that is why it is crucial for the policyholder to ensure that this situation is avoided. It is where Claim Settlement Ratio (CSR) comes in.
The IRDAI (Insurance Regulatory and Development Authority) calculates the percentage of claims the company has settled and publishes the results as the company’s CSR. These Claim Settlement Ratios are released by IRDAI each year for all life insurance providers.
What is Claim Settlement Ratio, and how is it calculated?
Every year, numerous statistics on Indian insurance providers are published by the IRDAI. Some data points are the claims made, the solvency ratio, etc. The Claim Settlement Ratio is one of these data points, and it should be considered before purchasing insurance coverage with any insurer.
This ratio gauges the volume of claims the business receives and pays out. It might be characterized as the proportion of claims that have been resolved to those that the company has received.
Claim Settlement Ratio = (Number of claims approved/Number of claims received) x 100 It is expressed as a percentage and is quick and straightforward to calculate.
How Can It Help You Decide on Your Term Plan?
Before acquiring any Term Insurance Plan, it is essential to consider the Claim Settlement Ratio. It demonstrates to the customer the company’s dependability and credibility and also functions as a good indicator of the company’s legitimacy. Additionally, the claim settlement ratio’s constancy over time is also a significant factor. Therefore, it is important to evaluate the historical claim settlement ratio of the companies over the last five years.
For instance, let’s say an insurance company denies or rejects just 500 claims out of the total 10,000 submitted in a particular year. As a result, the company’s claim settlement ratio will be a very healthy 95%, indicating a high chance of your Claim being settled promptly.
CSR, however, shouldn’t be the sole metric used to assess a company’s performance. Other factors like the solvency ratio and the company’s credit rating also indicate the company’s financial strength. Also, it should be noted that a claim might still get rejected by the insurer despite all these aforementioned indicators being on the higher side.
Common Reasons Why Term Insurance Claims Might Get Rejected
As a policyholder, you must also work to reduce the likelihood that the company will deny your claims. To do this, you must also comprehend the potential grounds for denying your claims.
The following are the grounds for rejecting claims:
● Wrong Medical Details – Hiding a person’s medical history is one of the leading causes of claims being denied. Never attempt to conceal any medical conditions or past diseases. It is essential to report any behaviours like smoking or alcohol consumption and past medical history.
● Policy Lapse – The Claim will be denied if submitted after the policy has expired. The premiums must be paid on time for the Claim to be authorized, and if they are not, they must be paid within the grace period for the policy to remain in effect.
● Delay In Filing The Claim – The Claim may be rejected if the policyholder fails to file the Claim within the allotted time. These situations frequently trigger investigations by the business.
● Information That Is Either Missing Or Wrong – One must include all necessary information and ensure that all information is correctly filled out to avoid errors. Forms must be thoroughly examined to prevent mistakes.
Term Insurance Plans are regarded as one of the most crucial investments anyone can make. They’re no longer a choice but a requirement. And the pandemic has amply demonstrated this. Therefore, it should go without saying that everyone’s portfolio should include insurance, especially those who have dependents.
The choice of insurance coverage would then be the first consideration. It can be calculated using the term insurance calculator available online for free. Additionally, it can help determine the premium amount for your desired term insurance plan. Finally, you must consider the Claim Settlement Ratio during this process, among other things. Because if your insurance provider doesn’t come through for you when you need them the most, you risk having no insurance at all. Therefore, keep this in mind while purchasing an insurance policy.