The need for constant planning and investment for financial stability in the future is rising. To keep up with the demand, multiple options for term plans are available in the market, and the number of insurance providers is increasing rapidly to level it.
Before deciding which term plan to invest in, you need to assess different factors relevant to better choosing an insurance provider. One key factor is the claim settlement ratio, which plays a significant role in the final decision. A good claim settlement ratio reflects positively on the insurer. But what is the meaning of a good claim settlement ratio?
This article digs deeper into the meaning of a good claim settlement ratio.
What is the Claim Settlement Ratio?
The claim settlement ratio is a measurement metric that allows policyholders to check the credibility of an insurer. This ratio is provided by the Insurance Regulatory and Development Authority of India and is primarily based on the number of claims settled by an insurer compared to the number of claims received. It is marked as a percentage to denote the cumulative score or ratio.
To explain it better, here is an example with calculation. Suppose an insurer received 1,000 claims for settlement in a year and completed payouts for only 955 claims. In this scenario, the claim settlement ratio will be 95.5%.
The formula for it is:
claim settlement ratio = (number of settled claims/number of claims received)*100
What Makes a Good Claim Settlement Ratio?
Understanding what differentiates a good claim settlement ratio from a not-so-good one is dependent on multiple aspects. Usually, a claim settlement ratio on the higher side is considered positive as it highlights the insurer’s capacity to fulfil the commitment to the policyholders of timely claim settlement.
However, the confirmation that an insurer is a good choice cannot solely be based on a high claim settlement ratio. Some other aspects include:
- The industry average for the insurer compared to other insurance providers of similar insurance products is an important metric. This will give you a clear understanding of their market position.
- Reputation and reviews of a particular insurer also have high weightage. For instance, an insurer with a good claim settlement ratio and fantastic reviews online is a better choice than an insurer with a higher ratio but bad reviews.
- For an insurer with a decent to high claim ratio, understanding the reasons behind the denial of claims is important for making a decision. If the reasons are not reasonable to an extent, the assurance of claim settlement goes low, so it might not be a good choice.
- Lastly, the financial capacity of an insurer is also an important aspect before making the final decision. When you choose between insurers with an equal high claim settlement ratio, inclining towards a more financially stable insurer will be more beneficial.
Why is Claim Settlement Ratio Important?
Investing in a term life insurance policy is a big decision. You pay premiums regularly towards the chosen term plan to guarantee financial security for your family when you are not around. Given the dependency and trust you put on an insurer, getting the guarantee of timely claim settlement is a big relief.
Claim settlement ratio is an extremely reliable indicator to help you decide which insurance company to trust for your family’s future. Therefore, the higher the settlement ratio, the better the chances of a smoother claim process for your family, which is an important decision.
Conclusion
To choose an insurer, understanding the claim process and the amount of trust you can put into an insurer is based on many factors, a good claim settlement ratio being a big one. It is a valuable metric for all policyholders to evaluate any insurer’s performance and reliability properly.
However, always remember to consider other aspects like reputation, customer service, terms and conditions, financial capacity, etc., to make an informed decision.
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