Decoding Claim Settlement Ratio

In order to choose the best life insurance plan, a claim settlement ratio or claim paid ratio of the insurer (insurance company) is one of the crucial calculation metrics that requires due consideration.

A claim settlement ratio highlights the number of claims settled by an insurer versus the number of actual claims filed by the policyholder or their nominees. Simply put, a claim settlement ratio is the ratio of total claims received or pending in a particular financial year and total claims resolved by the insurer.

The Basic Math

A claim settlement ratio is derived by dividing the total number of insurance claims paid by the total number of insurance claims received by the insurer x 100. Take, for instance, an insurer receives 10,000 new claims in a year. If the insurer pays 9,920 claims and rejects the remaining for various reasons. So, the claim settlement ratio for the insurer will be (9,920/10,000x100) or 99.2% in a financial year.

The claim settlement ratio remains an ideal indicator of the past performance of the insurer. Generally, a claim settlement ratio exceeding 80% is classified as good. However, the best life insurers in India usually have a claim settlement ratio of more than 95%.

The claim settlement ratio can also underscore the average time the insurer takes to settle the claim.

Insurance Regulatory and Development Authority of India (IRDAI) has defined the maximum time an insurer can take to settle a death claim. According to the insurance regulator, once all the documents have been submitted, the insurer must settle the claim within 30 days.

This limit includes the time that the insurer will take to clarify and verify the details. An exception would be in case the circumstances require further investigation, it may take up to 120 days to settle the claim.

The Key Purpose

The primary purpose of a life insurance plan is to provide financial support to families in the face of the untimely demise of an earning member. A higher claim settlement ratio is a sort of benchmark of the claims paid efficiency of the insurer. This remains a comfort factor for the family who can look forward to getting their claim settled in a hassle-free manner when the need arises. In this regard, it is worthy to note that HDFC Life has set a new benchmark of 98.66% claim settlement ratio for the financial year (FY) 2021-22.

Insurance regulator IRDAI publishes a ratio of all the insurance companies in India on a yearly basis, the information of which is available on the website. For any discerning buyer, it is important to check this data before deciding on the insurer. The report includes data and percentages for the number of claims filed by policyholders, the number of claims settled and the number of claims rejected. However, do not make this as the only parameter while buying a life insurance policy.

The New Benchmark

HDFC Life QuickProtect is an end-to-end solution that comprises four coverage benefits clubbed into one solution: HDFC Life Click2Protect Life with Accidental Death Benefit option, HDFC Life Critical Illness Plus Rider, and HDFC Life Income Benefit on Accidental Disability Rider. The plan is specifically designed to protect you against 19 critical illnesses with a critical illness rider and offer a life cover with two times coverage for accidental death.

With the plan, you will get three different package sum assured options, including – Rs 75 lakh, Rs 1crore, and Rs 1.25 crore. One of the biggest benefits of HDFC Life QuickProtect is that you will get regular monthly income payable for 10 years in case of Accidental Total Permanent Disability.

Gain insights into the benefits of HDFC Life QuickProtect Solution from the following table: