Home >Money >Personal Finance >Understanding claim settlement ratio: 5 points

Claim settlement ratio is one of the most important factors to consider while choosing the insurance company to buy life or health insurance. In case the insurance company fails to settle the claims, the whole purpose of buying an insurance policy gets wasted. Claim settlement ratio is a metric that reveals the percentage of insurance claims an insurer has settled or paid out during a financial year. In other words, the settlement ratio is defined as the percentage of the total number of insurance claims paid out by an insurance company compared to the total number of received claims. For an instance if a company has a claim settlement ratio of 97%, it means the insurer paid 97 out of 100 claims. The remaining three claims were rejected.

Here the five key points you should know about claim settlement ratio of insurance companies:

1)Claim Settlement Ratio is calculated as -- Total Number of claims approved / Total Number of claims received

2)Claim settlement ratio is measured for all the company products put together. For an instance, claim settlement ratio for a life insurance company will include claims settlement of its term plans, ULIPs etc. It is never provided for one single product of the company.

3)Claim settlement ratio should be consistent. Always check the claim settlement ratio of an insurer for at least past five years. If there is no inconsistency and the claim settlement ratio is high, you can trust the insurer's capability to settle claims.

4)IRDAI publishes the claim settlement ratio of all the public and private insurers in its Annual Report which is available on its website.

5)Also look at the number of claims received by the insurance company. Also see how big and old the insurance company is.

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