Getting insured is a good way to ensure that in dire circumstances and emergencies, you get the financial help you need. One of the vital things you need to look into while buying insurance from an insurance company is the claim settlement ratio.
It is pertinent that you check the claim settlement ratio if you are looking for important insurances like life insurance and health insurance especially when you are pondering over which company is good for you.
Apart from scrutinizing the plethora of policies and covers provided by the insurance companies, you need to also check this crucial ratio published by the IRDA (Insurance Regulatory and Development Authority) every year. Many people make the mistake of not doing so. You can judge various insurance companies based on this ratio and get the right one for you.
How is the Ratio Determined?
This ratio is calculated using two factors, that is:
- The number of claims of customers settled by the insurance company and;
- How much claims they received from their customers.
The formula to determine the ratio is the percentage derived from dividing the number of claims settled by the total number of claims received. This essential element will determine the reliability of an insurance company regarding how well it pays the claims. The number will let you compare different insurance companies and make a right decision. For this, look for company that has the highest value as it will give its customers claims more likely and sooner.
How to Judge Various Companies Using this Ratio?
Let us take an example to understand why this ratio is an inevitable judge of the insurance companies. In a year, a fictional insurance company successfully settled the insurance claims of 80 people and has 20 pending and/or rejected claims.
That same year, they had received 100 insurance claims in total from their customers. According to the formula, we have the Claim Settlement Ratio as 80/100 converted into a percentage which then becomes 80%. So, this company successfully settles the claims of 80% of their policyholders in a year.
Another important factor apart from the claim settlement ratio is the number of claims received by the company. In our earlier example, the insurance company had a total of 100 claims. We have a better number when another company gets 10,000 claims a year and can successfully settle the claims of 9,980.
Even though this company has 20 pending claims and/or repudiated claims, their claim settlement ratio becomes 99.8%. So, looking at the numbers will help solve the confusion where two companies have the same claim settlement ratio.
Importance of the Consistency of the Ratio
The consistency of the Claim Settlement Ratio over the years of a company is very essential as well. For the companies you select as your options, it is pertinent that you look into their historical claim settlement ratio in the past 5 years. Ensure that there are no inconsistencies in claim settlement ratios.
While you may feel like going for the company who jumped from 72% to 92% in the last five years, go for the ones that have a smaller difference or a small range in their ratios. That is, go for the company with the range 88% to 90%. They are the more reliable ones.
What Companies to Choose?
In India, few of the top insurance companies include LIC, Bajaj Allianz, SBI Life, ICICI Prolife, HDFC Std, Max Life, Birla Sunlife, Tata AIA Life, Exide Life and Kotak Mahindra. The mentioned insurance companies had a Claim Settlement Ratio above 90% in the year 2016-17. Of these companies mentioned, the best track record is maintained by Life Insurance Corporation of India or the LIC.
Apart from having the best claim settlement ratio, they have the highest number of claims received. Try to aim for at least 85% ratio number. Any company with a claim settlement ratio above 90% is a good insurance company.
You can check and compare claim settlement ratio by visiting the IRDA website. Note that many companies remove the claims of fraudulent cases which could dampen their claim settlement ratio a bit for no fault of theirs. The company cannot be blamed because they have to inevitably remove such frauds.
How to Claim a Settlement?
The process of claim settlement involves the following steps:
Reporting your Claim
The first step involves reporting your claim. It can be reported through online, at the company’s branches, Claims Care Helpline, e-mail or SMS.
Filing the claim in the right way will make the settlement process faster. Ideally, the company should process your (the policyholder’s) claim fast once they have been intimated. It should be a hassle-free process. They take this time to assess and approve the relevant documents.
After the above process is complete, the final settlement is done. Once all the relevant documents get verified and approved, the settlement takes place.
Why Policy Claims Get Rejected- Steps to Avoid Getting Rejected
It is imperative that you look through the policy claims process and coverage offered so that at the time of duress, your claim is settled faster without much hassle. This can happen if you understand why they get rejected in the first place:
- You are not doing proper research on the insurance plan you are buying that would not meet your needs is a big mistake. If you are not satisfied with the clauses provided in the policy, you can get a refund by returning the policy back to the insurer.
- Double-check the details you enlisted in all the forms and ensure that it is the same detail everywhere and that there are no changes. Missing or incorrect information could lead your claim to get rejected completely.
- You must also not hide your medical history like smoking, drinking habits, previous illness for avoiding hindrances during the claiming process.
- One of the gravest mistakes you can do is a policy lapse where you do not renew the policies and pay your premiums within the grace period. As soon as you complete the purchasing of a policy, you must inform your nominee about the same.
The claim settlement ratio is the most crucial factor to consider while choosing an insurance company for your needs. Other than this, the policy holder should broaden his research about coverage offered by various plans of the insurance companies. After checking all the prerequisites, you should make a reliable decision.