IRDA Claim Settlement Ratio: Life Insurance

Buying a life insurance policy is crucial to secure your family's financial future. This is why choosing the right policy and an insurance company with an excellent Claim Settlement Ratio (CSR) is critical. In this article, you’ll learn everything about the IRDAI Claim Settlement Ratio in life insurance.

Buying a life insurance policy is crucial to secure your family's financial future. This is why choosing the right policy and an insurance company with an excellent Claim Settlement Ratio (CSR) is critical. In this article,...
Buying a life insurance policy is crucial to secure your family's financial future....

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What is the IRDAI? 

The Insurance Regulatory and Development Authority of India (IRDAI) is the governing body of the Indian insurance industry. It grants licences to insurance companies, monitors their policies and premiums to ensure they align with established benchmarks and helps resolve disputes between policyholders and insurers. IRDAI sets regulations for the industry, promoting its growth while safeguarding the interests of policyholders. It also ensures that insurance remains affordable and accessible to all Indian citizens.

In its fiscal year 2022-23 report, IRDAI published claim settlement details for the claim settlement ratio of life insurance companies across India. The life insurance sector's individual death IRDAI claim settlement ratio 2023 stood at 98.45% during this period.

What is a Claims Settlement Ratio in Life Insurance? 

A life insurance Claims Settlement Ratio measures the percentage of claim applications an insurance company has settled out of the total claims received in a year, including the ACKO Claim Settlement Ratio. 

If an insurer has a high claim settlement ratio IRDAI, the company can settle claims faster. This indicates efficiency in handling and processing claims. In addition, the highest claim settlement ratio ensures that the insurance company can deliver on its promises to settle claims smoothly.

When policyholders choose a Life Insurance Policy, they can base their choice on an IRDAI Claim Settlement Ratio. However, selecting an insurance company solely based on CSR is not recommended as various critical selection criteria exist. Potential policyholders should also research the insurance company's product offerings, customer service, and social media handles, among other criteria.

How to Calculate Claim Settlement Ratio in Life Insurance 

You can look at the insurer’s CSR to determine if the insurance company you are looking at is the right one for their family. Here’s how to calculate CSR.

If an insurance company settles 9,000 claims out of 10,000, the Claim Settlement Ratio is calculated by dividing the settled claims by the total number of claims received.

Claims Settled divided (÷) by Total Claims Received Times (×) 100 = CSR 

  • 9,000 ÷ 10,000 = 0.9X
  • 0.9 × 100 =  90%

In this case, CSR is 90.

How does claims settlement work? 

Claims settlements are executed in a structured process that insurance companies adhere to. Most insurance companies carry out claims settlements using the following steps:

claim settlement process is initiated when the claim is reported to the respective insurance company. Reporting a claim can be done online, over the phone, by visiting the insurance company's office, or by other methods the insurance company specifies. When choosing an insurer, considering the claim settlement ratio can help ensure a smooth claims process.

The person who reports a claim should furnish the insurance company with the documents required to substantiate and verify the claim. Although the type of documents needed will vary by insurance company, policy, nature of the claim, and death of the policyholder, most insurance companies require similar documents. Selecting a provider with the best claim settlement ratio in life insurance increases the likelihood of approval when the correct documents are submitted.

 

After the beneficiary or claimant has submitted the required documents, the insurance company will assess the claim and its legitimacy. The insurance company may appoint an assessor to investigate the claim and verify the details. This process is crucial in ascertaining the relationship between the claimant and policyholder and determining if they are the beneficiaries that the policyholder has stated in their life insurance policy document. Companies with the highest claim ratio in life insurance may have a more straightforward process of making claim verification faster.

After the insurance company's assessor assesses and verifies the claim settlement application, the insurance company will decide if they should accept or reject the claim. If the details furnished were wrong, or if the beneficiary is not who the policyholder stated, the claim will be rejected.

On the other hand, if the beneficiary is correct and all documentation is in place, the claim is accepted. The insurance company will start the payment of the settlement amount based on the terms and conditions of the life insurance policy. The amount settlement ratio of insurance companies can also impact the payment timeline and process efficiency.

After the claimant agrees to the settlement amount proposed by the insurance company, the company will process the payment for the beneficiary. The claim settlement payment may be made via cheque, bank transfer, or electronic payment.

Claims settlements take days to weeks to process and only happen after a period of time. The process could extend further depending on the policyholder's death and circumstances surrounding it, any challenges surrounding the policy, or issues in documentation. Claimants must ensure they bring the necessary documents to finish the process quicker and smoothly.

Which documents do I need for claim settlement?

The person who applies for a claim will need to submit a set of necessary documents to the insurance company. These documents and types can vary by insurance company, policy, and cause of the policyholder's death. Generally, the following are the most common types of documents needed to settle a life insurance claim. 

Death Certificate

The death certificate establishes the policyholder's death date, time, and cause. This is the most crucial document in settling a claim. 

Policy Documents

The Life Insurance claim settlement ratio policy documents state the terms & conditions and criteria, including the policy application, details of the policy, and any riders or endorsements the policyholder may have bought. 

Identification Documents

To establish the relationship between the claimant (usually the beneficiary) and the policyholder, identification documents may be furnished, including a driver's license, aadhaar card or passport.

Proof of Insurability

Proof of insurability documents can include medical records, lab reports, and medical documents to establish that the policyholder has taken out a policy with the insurance company.

Beneficiary Designation Form

This form identifies the policy's chosen beneficiary and proves their identity so they can claim the death benefit in its entirety.

Claims Form

The insurance company usually has a claims form the beneficiary must complete and turn in to begin the claims settlement process.

The claimant should always find out more about the claims settlement process and the terms & conditions outlined because these variables differ by insurance company and policies. The insurance company may require extra documents depending on the circumstances of the policyholder's death or the terms & conditions of the life insurance policy.

Why is Section 45 of the Insurance Act Important? 

A special section of the Insurance Act known as Section 45 protects policyholders and their families in case of Claims Settlement disputes that may arise after a certain period. According to Section 45, if the insurance company suspects any foul play and has the evidence to support it, they have the authority to remove the highest claim settlement ratio in life insurance

Insurers can investigate suspicious Settlement Claims within 3 years of receiving the Claims requests. However, they do not have the right to reject claims made after 3 years, even if the claim might be fraudulent.
 

10 Tips for Smooth Claim Settlement

Ensuring a smooth claim settlement process in life insurance requires preparing and understanding the policy details. Here are some practical tips to follow:

Thorough Documentation

Keep all policy-related documents organised and accessible. This includes the policy document, premium receipts, medical records, if applicable, and any correspondence with the insurance company. Having these documents at hand can expedite the claim process and help promptly address any queries from the insurer.

Understand the Policy

Familiarise yourself with all aspects of your policy: know the terms, conditions, exclusions, and benefits. Understanding these details ensures that you know what the policy covers and doesn't, which can prevent disputes and delays in claim settlements.

Prompt Claim Reporting

Notify the insurance company as soon as possible after the insured event occurs. Delays in reporting can lead to complications and even claim denials. Most insurers provide multiple channels for reporting claims, including online, phone, and in-person options.

Complete and Accurate Claim Form

Fill out the claim form thoroughly and accurately. Provide complete and factual information to avoid discrepancies resulting in delays or denials of the claim. If you’re unsure how to answer a specific question, seek clarification from the insurer rather than risk incorrect information.

Submit the Required Documentation

Submit all required documents as specified by the insurance company. This often includes the death certificate, proof of identity, and other legal documents. Check with the insurer if additional documents are needed based on the claim's specifics.

Follow Up Regularly

After submitting the claim, keep in touch with the insurer to track the progress of the claim settlement. Regular follow-ups ensure the claim is processed promptly and can help uncover any issues early.

Seek Professional Help

If the process seems overwhelming, consider seeking help from a financial advisor or lawyer specialising in insurance claims. They can offer guidance and support through the process, ensuring your rights are protected and the claim is settled fairly.

Prepare for Possible Rejections

Understand the common grounds for rejecting claims, such as nondisclosure of medical conditions or filing a claim for an excluded condition. If your claim is denied, carefully review the reasons and consult your advisor. You may be able to resolve the issue or file an appeal if the rejection was unwarranted.

Maintain Good Communication

Keep all communication lines open with the insurance company. Respond to their queries promptly and keep a record of all interactions. Good communication can prevent misunderstandings and ensure a smoother claim process.

Educate Beneficiaries

Ensure that all potential beneficiaries know the policy details and the process for claiming insurance. Educating them can prevent delays when swift access to the policy benefits is most needed. 

Policyholders and beneficiaries can help ensure the claim settlement process is smooth and stress-free by following the tips mentioned above.

Conclusion

When selecting a life insurance provider in India, the best claim settlement ratio in life insurance is crucial, as it reflects an insurer's reliability in fulfilling claims. A high claim settlement ratio indicates the insurer's ability to pay out claims effectively. With the highest claim settlement ratio in life insurance, policyholders can be assured that their beneficiaries will receive the due benefits without hassle. Before purchasing a plan, evaluate the CSR and the insurer's ability to settle high-value claims while considering their service quality, policy benefits, and technological advancements.

Frequently Asked Questions (FAQs)

Here’s a list of questions and their answers that are commonly associated with IRDAI Claims Settlement Ratio.

The Insurance Regulatory and Development Authority of India (IRDAI) is the Indian insurance industry's governing authority. It sets down the rules and regulations for the Indian insurance industry. 
 

A life insurance Claim Settlement Ratio is a value that shows how many claims an insurance company received in a year and how many they settled. CSR is the percentage of claims an insurance company settled in that year compared to the claims received.

In general, a higher IRDAI Claim Settlement Ratio signifies a lower risk and lower probability of claim rejections by the insurance company. Higher CSR means the insurance company is trustworthy and settles claims fast. 

IRDAI releases claim settlement data annually, detailing individual and overall term insurance claim settlement ratios for all registered insurance companies. This yearly publication allows policyholders to assess company performance, fostering transparency and aiding in informed decision-making about insurance providers.

Factors impacting an insurance company’s term plan claim settlement ratio include the efficiency of its claim processing, policyholder demographics, underwriting practices, fraud detection measures, and internal resources dedicated to claim verification and settlement. Consistent practices in these areas help maintain a favourable ratio.

Yes, IRDAI can impose penalties or restrictions on insurance companies that consistently fail to meet regulatory standards or maintain acceptable claim settlement ratios. Penalties range from monetary fines to operational restrictions, ensuring accountability and protecting policyholder interests.

Yes, IRDAI’s annual report on claim settlement ratios is publicly accessible. It provides policyholders with transparent information on each company’s claim settlement performance, helping them make informed choices based on insurers' reliability and past settlement records.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.

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Written by Neviya Laishram

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Reviewed by Vaibhav Kumar Kaushik Author info Icon

A professional Life Insurance writer, editor, and copywriter with a background in magazines, healthcare, education, and insurance.

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