Claim Settlement Ratio of Insurance Companies

Whether you are going to avail an insurance policy or are an existing customer of an insurance company, you should know the claim settlement ratio. It should be an indispensable metric for selection and retention of your insurer.

What is a Claim Settlement Ratio?

The Claim Settlement Ratio or CSR is the percentage of claims settled by an insurance company against the total number of claims received in a financial year. The effectiveness of insurance is highly dependent on the claim settlement ratio of the insurance company. A high claim settlement ratio is an indicator of the company's commitment to its policyholders and its ability to honor claims. It reflects the company's financial strength, customer service and efficiency in processing claims.

A low claim settlement ratio, on the other hand, could indicate poor customer service, lack of financial stability, or delays in claim processing. The claim settlement ratio is a crucial factor for both policyholders and insurance companies. For policyholders, it provides an idea of the company's reliability and trustworthiness. For insurance companies, it is a measure of their efficiency and customer service.

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Calculation of Claim Settlement Ratio

The CSR is calculated by dividing the total number of claims settled by the insurance company in each period by the total number of claims received during the same period. The resulting figure is then expressed as a percentage. For example, if an insurance company received 1000 claims in a year and settled 900 of them, its CSR would be 90%. It is important to note that the CSR can be affected by several factors, which we will discuss in one of our next sections.

Let’s glance at the CSR of the different types of insurance companies as per IRDAI Annual Report. The table below illustrates the insurance claim settlement ratio for the financial year March 31^st2022.

Public Sector General Insurers
Rank	Insurer	CSR on Number of Claims	Number of Claims Available for Processing
1	New India	95.85%	6494718
2	United India	87.16%	6715027
3	Oriental Insurance	82.67%	1343485
4	National Insurance	81.10%	2273687
Large Private Sector General Insurers
Rank	Insurer	CSR on Number of Claims	Number of Claims Available for Processing
1	IFFCO Tokio	95.28%	521384
2	SBI General	89.14%	725186
3	TAT AIG	85.11%	170160
4	Future Generali	84.42%	146840
5	HDFC Ergo	83.91%	789417
6	ICICI Lombard	81.79%	779314
7	Go Digit	81.42%	33044
8	Bajaj Allianz	81.10%	1228972
9	Cholamandalam	72.62%	161861
10	Reliance	58.69%	499247
Small Private Sector General Insurers
Rank	Insurer	CSR on Number of Claims	Number of Claims Available for Processing
1	Universal Sompo	95.83%	76718
2	Edelweiss (Zuno)	85.87%	16720
3	Liberty General	85.47%	55150
4	Royal Sundaram	83.24%	63228
5	Magma HDI	80.61%	12197
6	Kotak Mahindra General	77.98%	38657
7	Acko	72.05%	158469
8	Raheja QBE	61.14%	898
9	Navi General	49.03%	2415
10	Shriram General	22.86%	70
Standalone Health Insurers
Rank	Insurer	CSR on Number of Claims	Number of Claims Available for Processing
1	Aditya Birla Health	92.25%	419828
2	Max Bupa	89.07%	303561
3	Cigna TTk	88.68%	350408
4	Care Health	84.73%	605885
5	Star Health	77.72%	1892016

Note: For the sake of simplicity, the data has been rounded off. Source: Insurance Brokers Association of India (IBAI) report.

Factors Affecting Claim Settlement Ratios

When it comes to choosing an insurance company, one of the key factors that people consider is the claim settlement ratio. However, several factors affect the claim settlement ratio of an insurance company and some of them are described in brief here-

1.Type of Insurance Product

The type of insurance product offered by the insurance company plays a crucial role in determining its claim settlement ratio. For instance, health insurance products generally have a higher claim settlement ratio as compared to life insurance products.

2. Company's Underwriting Policy

The underwriting policy refers to the process of assessing the risk involved in providing insurance coverage to a customer. If an insurance company has a stringent underwriting policy, it may reject claims that do not meet the policy requirements. This can lead to a lower claim settlement ratio. On the other hand, if the underwriting policy is too lenient, the insurance company may end up settling claims that are not genuine. This can also lead to a lower claim settlement ratio in the long run.

3. Legal and Regulatory Framework

The prevailing legal and regulatory framework also plays a significant role in determining the claim settlement ratio of an insurance company. Insurance companies are required to comply with the regulations set by the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI mandates that insurance companies settle claims within a specific timeframe. Failure to comply with these regulations can lead to penalties and a lower claim settlement ratio.

4. Improving Claim Settlement Processes

Insurance companies are constantly looking for ways to improve their claim settlement processes to ensure timely and efficient processing of claims. This results in a better customer experience and higher claim settlement ratios for the company.

5. Utilizing Technological Advancements

Insurance companies are trying to improve their claim settlement processes by utilizing technological advancements. This includes implementing digital claims processing systems, using artificial intelligence to automate claim assessments, and providing a user-friendly mobile app for claim submissions.

Digital claims processing systems allow insurers to process claims faster and more accurately. These systems can also reduce the risk of errors and fraud. By using artificial intelligence, insurers can automate the claim assessment process, resulting in faster and more consistent claim decisions. Additionally, providing a user-friendly mobile app for claim submissions can make the claims process more accessible and convenient for customers.

6. Employing Best Practices

In addition to technological advancements, insurers can also improve their claim settlement processes by implementing certain best practices. This includes providing clear and concise policy documents, offering customer support throughout the claims process, and ensuring transparency in the claims process.

Clear and concise policy documents can help reduce confusion and misunderstandings when it comes to making a claim. Providing customer support throughout the claims process can help alleviate any concerns or questions that customers may have. Lastly, ensuring transparency in the claims process by providing regular updates to customers can help build trust and confidence in the insurance company.

By implementing these best practices and utilizing technological advancements, insurance companies can improve their claim settlement processes, resulting in higher claim settlement ratios and a better customer experience.

Challenges faced in Claim Settlement

1. Fraudulent Claims - Fraudulent claims, which can result in significant financial losses for insurers. Insurance companies need to have robust fraud detection mechanisms in place to prevent such claims from being processed.

2. Lack of documentation - The insurer may need to follow up with the policyholder to obtain the necessary documents, which can delay the claims settlement process.

Future of Claim Settlement Ratios

As the insurance industry continues to evolve, the future of claim settlement ratios looks promising. With the help of technology and regulatory changes, insurance companies are better equipped to handle claims and ensure timely settlement.

Predictive Analytics

One of the key technologies that will shape the future of claim settlement ratios is predictive analytics. By leveraging data and machine learning algorithms, insurance companies can better predict the likelihood of a claim being made and the potential cost of settling that claim. This allows them to proactively manage risk and allocate resources more efficiently, ultimately leading to higher claim settlement ratios.

Regulatory Changes

Regulatory changes are also playing a significant role in shaping the future of claim settlement ratios. In recent years, regulators have become more proactive in ensuring that insurance companies are transparent in their claims handling processes and that they settle claims in a timely and fair manner. This has led to increased scrutiny of claim settlement ratios and a greater emphasis on customer satisfaction.

As a result, insurance companies are investing more to improve their claims handling processes, including hiring more claims adjusters and implementing new technologies to streamline the claims process. This is not only good for customers, but also for insurance companies, as it can lead to increased customer loyalty and retention.

Overall, the future of claim settlement ratios looks bright, as insurance companies continue to innovate and adapt to changing customer needs and regulatory requirements. By leveraging technology and improving their claims handling processes, insurance companies can ensure that they settle claims in a timely and fair manner, ultimately leading to higher claim settlement ratios and greater customer satisfaction.

Conclusion

In conclusion, the claim settlement ratio is an important metric to consider when choosing an insurance company. It reflects the company's ability to settle claims and provide financial security to its policyholders. It is important to note that the CSR should not be the only factor considered when choosing an insurance company. Other factors such as premium rates, coverage options, and customer service should also be considered. When comparing CSR across different insurance companies, it is important to ensure that the comparison is made between companies in the same category and with similar products.

Speak to our representatives, so that we can help you choose the right insurance product and facilitate you with the best quote from top insurers. As BimaKavach, you can shop around and choose an insurance policy from a provider with a high claim settlement percentage.