How Claim Settlement Ratio Matters

As a customer, claim settlement ratio is your bottom line while choosing an insurance company. It reflects claims on how many policies were settled out of 100 claims received in that year. In plain words this number tells chances of your policy paying you if you make a claim.

What claim settlement ratio is good?

The ideal claim settlement ratio would be 100%, of course, but the average for life insurance industry has been 96% in 2011-12. The rest have been settled in later years, some rejected and a tiny number written back.

Reason for rejection is often that claim has been made under a clause that is excluded from coverage. Other reason could be lack of supporting documents.Whatever the reasons are, it turns out that among the life insurers LIC tops the chart for claim settlement ratio.

Life insurance company	Claim settlement ratio	No of claims settled
LIC	97.42%	7,12,501
ICICI Prudential	96.53%	14,314
HDFC Standard	96.17%	4,952
SBI Life	95.48%	11,328

In the ready recknor you can view claim settlement ratios of each life insurer. We could estimate that a ratio of 95% and above is good, between 90-94% is average, between 80-89% is still tolerable and claim settlement ratio below is risky! Insurance policies are taken to cover a risk, so you should choose wisely to avoid policies which are risky themselves.

Another set of numbers gives some more interesting inferences:

Parameter	LIC (in %)	Pvt insurers (in %)
Claim settlement ratio	97.42	97.03
Claims pending after 3 months	37.36	81.85
Claims pending after 1 year	16.97	5.43

Is claim settlement ratio the only number to look for?

Of course not! You wouldn't pay an absurd figure for a service only because it does what it promises to do. So the other most important parameter to weigh is the premium. Look for policies with premium in the median range and having good claim settlement ratio.

Claim settlement ratio matters in all types of insurance

It is more discussed  in life insurance, obviously because individuals deal more with it and also since it is a widely marketed product, but claim settlement matters in any insurance policy you buy. Do a comparative study of claim settlement ratio and premium of a couple of insurance companies before buying life insurance, mediclaim, motor insurance or any other type of insurance.

Do these to avoid insurance claim rejection and delay

Here is a simple list of things which if you follow will minimize your chance of bad insurance experiences: 

1. Choose an insurer with good track record, ie having above industry average claim settlement ratio and preferably not a new entrant in the business.

2. Be aware of policy exclusions and limitations, especially in case of mediclaim policies. Nobody else can be blamed if a certain condition you make a claim for is clearly excluded in the policy documents. Read list of exclusions in the insurance brochure well before signing the agreement.

3. Submit relevant documents on time. Any documents that can support your claim should be preserved and submitted at the earliest possible time. However your claim cannot be rejected for the only reason of delay in intimating it or submitting documents. In case of mediclaim policies confirm with the TPA or insurer whether the hospital is in their cashless facility network and in any case inform them before taking hospitalization.

Summary

Claim settlement ratio is the number of insurance claims settled per 100 claims received. Closer to 100, the safer it is to go with the insurance company. This is an important number since it shows the chances of your insurance claim being rejected or paying out benefit.