What is Claim Settlement Ratio and Why is it Important?

Sep 17, 2018 | 4 months ago | Read Time: 3 minutes | By iKnowledge Team

claim settlement ratio

Life insurance is a serious business. After all, a policy holder trusts a life insurance company to secure his or her loved ones’ financial future. To ensure you pick the right company, investors look towards the claim settlement ratio—a metric that reflects the total number of claims a company accepts.

Public vs Private Life Insurance Players

For a long time, it was public life insurance players that led this metric. These are government-owned companies that displayed excellent customer satisfaction and managed to verify and accept most claims.

According to the Insurance and Regulatory Development Authority (IRDAI), the claim settlement for private players had gone up by 2.24%, at an average of 93.72%. However, Aegon Life’s average claim settlement ratio stood at 95.67%. In 2016-17, we honoured 571 claims and paid Rs. 56.640 crores during the period.

This was possible thanks to our smart and innovative products that offer exciting customization options and top-notch customer service.

Why is claim settlement ratio so important?

Claim Settlement Ratio as previously mentioned is the total number of claims a life insurance company accepts in a certain period. Reflected in percentage, its calculation is simple to understand.

Claim Settlement Ratio = Total Number of claims approved/Total Number of claims received

As insurance buyers, claim settlement ratio is an objective yardstick to determine which insurance provider is reliable. Most financial advisors suggest checking the claim settlement record of any insurance company over lowest premiums and highest benefits.

Reasons Why Policy Claims Get Rejected

When you are selecting your insurer, it is important to understand the policy claims process so that in the time of an emergency, your claims arrive hassle free. One way to determine the claims process is by understanding why life insurance claims get rejected.

  • Careless attitude for life insurance: It is very important to research before buying. There are many aggregator websites that let you make quick comparisons of the costs and features of different policies. If you buy an insurance plan without proper research, you may most likely end up with a policy that is average and does not suit your needs.
  • Missing or incorrect information: When you fill up life insurance policy forms, always double check the details that you write down. This is to make sure at the time of claim process, your application is reviewed and the information you have provided remains the same during the claiming process. If this information is found to be misleading or faulty, you claim might be rejected entirely.
  • Hiding medical history: One of the most important factors of disclosing your information is to provide the correct medical history. Habits such as alcohol intake, smoking or any previous illnesses should be shared with your insurance provider so that during the time of claim settlement there are no hindrances.
  • Policy lapse: The most prominent threat to claim settlement is a policy lapse. Most insurance companies offer a grace period to pay your premiums on time. However, claims will not be processed if the policy is not renewed within the grace period.

Points to Remember

The percentage for claim settlement ratio is measured for all the company products put together and not one single product.

Here is an example to illustrate the above formula:

Say a life insurance firm receives 1,000 claims in the period of one year

  • It accepts 971 claims and pays them the sum assured
  • It rejects 29 claims
  • So, the Claim Settlement Ratio (971/1000) = 97.1%
  • Higher the percentage more is the likelihood that a policyholder will see his or her claim accepted when filed

Another important reflection of this ratio is on the company’s finances. High ratios, such as ones above 95% tell a prospective life insurance customer that a company’s finances are secure since they are willing to pay the claim amount to so many customers.

It also shows that insurance companies care for the customer’s loved ones and attend them well during trying times. And, at Aegon Life we ensure their claims and other requests are handled well.

Ever since we commenced operations in 2008, we have grown, and today Aegon Life is one of India’s top five life insurance companies that settles claims per individual. So, the aspect that has stayed the same all this time is – we deliver what we promise.

Reference:

https://www.dnaindia.com/business/report-now-insurers-settle-more-than-95-death-claims-2104304

Advt. no.: IA/Sep 2018/4409


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