A term insurance policy is a pure form of life insurance that pays the death benefits, and it does not offer any maturity benefits. This makes the term plan a policy that can get you high return at an affordable premium. Many insurance companies that offer term insurance and your job is to find the one who is most likely to settle the claim. This is where the claim settlement ratio can help you determine which policy provider can be most trusted.
What is the Claim Settlement Ratio (CSR)?
Claim Settlement Ratio (CSR) is a mathematical measuring system that determines the possibility of an insurance claim being settled by an insurer. It is the ratio of the number of insurance claims received by the insurance company and the number of claims settled by them.
One thing that you need to understand is that an insurance company’s CSR indicates how many claims are settled by them across all their insurance products, and not just term insurance.
For example, imagine an insurance provider received 1,000 death claims between April 2018 and March 2019. If they settle 950 claims, reject 40 of them, and 10 are still under consideration then:
- The CSR is 95%
- The rejection ratio is 4%
- The claim pending ratio is 1%
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Once you have this data about your preferred insurer, you can get a clearer idea about the chances of your claim being settled by them.
Importance of CSR
The CSR was standardized by the Insurance Regulatory Development Authority of India (IRDAI), an organization tasked with regulating the nation’s insurance industry. When you have access to the CSR data, you can make a better decision regarding which insurer you should select to buy your term insurance policy. If you decide to buy a term insurance plan, you need to understand the CSR better. Here are a few aspects that can help:
It is updated every financial year
The term insurance claim settlement ratio by IRDAI is updated every financial year. This is important as you can compare the ratio with previous years and determine how an insurance company is performing. A CSR of over 85% can be considered as good.
It is not everything
The CSR is important, as it makes it easier for you to know which insurance provider can offer you the best service. However, it does not clearly show every aspect of an insurance provider regarding their term insurance settlement data. Here are a few things that can affect the data:
- The CSR shows the percentage of settled claims across all policies, and not only the claim settlement ratio of term insurance, which means that the data is not specified
- The data is negatively affected when a policyholder provides false data and try to commit a fraud, which leads to rejection of the claim
- The CSR shows a lower percentage even when the claim is rejected because of an error from the insurer
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The above points show that some aspects of the CSR might affect the data negatively, even if the insurance company has the intention to settle as many legit claims as possible.
Hence, you should consider the CSR ratio of an insurer when buying the term plan, but you must also factor in all the different aspects of it before reaching a conclusion.