Are you looking to buy an insurance policy? If yes, then along with premiums. compare the claim settlement ratio of the insurance companies. It is one of the crucial factors to consider while narrowing down on insurance firms. It helps the buyer assess the probability of the claim settlement in the future.
The objective of insurance will be lost if the buyer doesn't get the claim when required. It becomes all more important when the beneficiaries are completely dependent on the insurance funds. In such a scenario, a claim being rejected will be a huge financial loss.
So what is the relevance of claim settlement ratio? What does it indicate?
Settlement ratio indicates the total number of claims that are settled by an insurance firm. The ratio is measured by dividing the total number of claims received by the total number of settled cases.
For example, if an insurance company receives 2,000 death claims and settles 1,000, the settlement ratio of that insurance company would be 50%. The higher the settlement ratio of the insurance company, more the company is preferred for buyers.
As per the data of the ‘Insurance Regulatory Development Authority', there are six life insurance firms that have got a settlement ratio of more than 90% in FY2012-13. With 97.73%, LIC tops the list of companies, with best settlement ratio. Among private companies, there are five firms, which have a settlement ratio above 90%. These insurers are SBI Life, Max Life, Kotak Life, ICICI Prudential Life and HDFC Life. The life insurers at the bottom of the list are Tokio and DLF Pramerica Life, Aegon Religare and Shriram Life.
Apart from the claim settlement ratio, the buyers should also look out for the duration of the claim settlement. The company should have a good record of passing the proceeds to the beneficiaries. ICICI Prudential is one of the private insurers that settle most of the claims in less than 30 days.