The document discusses how a life insurance company's claim settlement ratio (CSR) can help policyholders understand the company. CSR is calculated as the number of claims settled divided by total claims received. A high ratio indicates more claims are paid out. While CSR provides insight, it has limitations and isn't constant year-to-year, so policyholders should monitor how it changes. Statistical data is given showing the CSR of major Indian insurers ranging from 98.33% to 95.31%.

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Judging A Life Insurance Company Based On Its
Claim Settlement Ratio

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What is a Claim : The Process
The family intimates
about the loss of the
person insured,
review and
verification is done
by the company for
the payment to be
made.
The intimation is the
claim raised by the
company for their
payment of the
insured amount.
The company checks
the terms of the
policy and review the
claim before making
any payment to the
nominee/family or to
the insured person in
case of maturity of
the policy.

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2 Situations for a Claim
Death Claim
If the insured person loses his or her life, the family
members get financial support of a lump sum
amount from the insurance company to the extent of
sum assured. This claim so arises when the insured
person dies out of accident or critical illness.
Maturity Claim
There are some of the life insurance policies which
pay either on the loss of life of the insured or on the
maturity of the policy. If the insured person survives
the term of the policy then he or she can claim the
money after the maturity of the policy from the life
insurance company.

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Claim Settlement Ratio & Calculation
Claim Settlement Ratio or CSR is the total number of claims settled by the insurance
company against the total number of claims received by it within a year.
CSR= Total number of claims settled/Total number of claims received
Let us assume a life
insurance Company
XYZ Pvt. Ltd. settled
1000 claims in the
year 2015-16 out of
1200 claims which it
received in the year.
CSR=
(1000/1200)*100 =
83.33%
Then the Claim
Rejection Ratio =
100/1200*100 =
8.33%
And Claims Pending
Ratio=
100/1200*100 =
8.33%

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How Claim settlement Ratio help in understanding the
Insurance Company?
Claim Settlement Ratio helps the policyholder to understand the genuineness of the
life insurance company. The insurance companies might not pay the sum assured to
the insured person or his family when they claim the money. It mainly happens if the
insurance company found
The insured person is trying to cheat the insurance company by claiming money on
false ground; or
The policy’s terms is not accordance with the claim the insured person or his legal
heirs are making; or
There is any misinterpretation of the circumstances of the policy; or
There is a dispute regarding the legal heirs of the insured person.

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How Claim settlement Ratio help in understanding the
Insurance Company?
If the company is involved in fraudulent activities of
not paying the sum assured to the insured even
when the claims are genuine, the insurance
company cannot be trusted.
Insurance CSR gives a clear cut indication of the
performance of the insurance company on the basis
of the proportion of claim settlement and the time it
takes to settle the claims.

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Limitations of CSR
 It is a percentage but not an actual figure. An actual figure of the
number of claims not settled against the number of claims made
would give a better idea about the company’s performance in
settling claims.
 In the earlier years of any life insurance product, CSR is not a good
indicator of performance. It is a better indicator in the later years.
 CSR is not constant, it changes every year. So any investor or
policyholder needs to keep an eye on the change of CSR before
buying the policy.

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Statistical Data of Insurance companies in India with
their claim settlement ratio
I. LIC (98.33 %)
II. Max Life (96.94%)
III. Tata AIA (96.80%)
IV. ICICI Prudential (96.20%)
V. Aegon Life (95.31%)

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Conclusion
Analyzing the insurance claim settlement
ratio is highly advised to all the
policyholder or the ones thinking of buying
new life insurance policy for optimizing the
chances of having their claims settled
during the hours of need.

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