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Understanding claims settlement ratio in life insurance: What policyholders need to know
CSR serves as a critical benchmark for policyholders seeking reliable life insurance coverage. By understanding how CSR is calculated and its implications for insurer reliability, consumers can make informed decisions that align with their financial protection needs.
By Anshul
June 14, 2024, 5:50:45 PM IST (Published)
The claims settlement ratio (CSR) stands out as a crucial metric that life insurance policyholders should closely consider when evaluating insurance providers.
CSR is a numerical measure that indicates the percentage of claims settled by an insurance company relative to the total number of claims received in a specific period, typically a financial year.
According to Rajesh Krishnan, Chief Operations and Customer Experience Officer at Bajaj Allianz Life, CSR is the "moment of truth" for insurers, where the ease and efficiency of claim processing define customer trust and satisfaction.
"It reflects how effectively we support our customers when they need us the most," he told CNBC-TV18.com.
Calculation and determination
CSR is calculated by dividing the total number of claims paid out by an insurer by the total number of claims received.
For instance, if an insurer receives 100 claims and settles 99 of them, the CSR would be 99%.
This metric is crucial for policyholders as it illustrates the insurer’s track record in fulfilling claims promptly and fairly.
Significance for policyholders
Policyholders should prioritise insurers with a high and consistent CSR.
A high CSR indicates not only efficient claim settlement processes but also a strong financial foundation and prudent management practices within the insurance company.
Krishnan emphasised, "When choosing a life insurance policy, policyholders should look beyond premiums and benefits. A high CSR demonstrates the insurer’s reliability in providing financial protection to your loved ones when you’re no longer there."
This figure is published on insurers’ websites and other platforms, providing essential information for making informed decisions.
A look at claim settlement ratio of some of the life insurance companies as published by IRDAI in its annual report FY22-23:
Insurer Claim Settlement Ratio % of Total Claims
Max Life 99.51% 0.49%
HDFC Life 99.39% 0.59%
Aegon 99.37% 0.63%
Edelweiss Tokio 99.20% 0.80%
Bharti Axa 99.10% 0.90%
PNB Met Life 99.06% 0.91%
Bajaj Allianz 99.04% 0.94%
Tata AIA 99.01% 0.97%
Canara HSBC OBC 99.01% 0.90%
Pramerica Life 98.80% 1.06%
Aviva 98.75% 1.25%
Reliance Nippon 98.58% 1.39%
LIC 98.52% 0.87%
Kotak Mahindra 98.25% 1.50%
Aditya Birla Sun Life 98.12% 1.88%
Sahara 97.87% 1.07%
Shriram 97.40% 2.15%
SBI Life 97.05% 2.73%
India First 97.04% 2.64%
Exide Life 96.27% 1.40%
Star Union 96.07% 3.77%
Ageas Federal 96.06% 3.11%
ICICI Prudential 95.28% 4.45%
Future Generali 95.04% 4.96%
Private Sector Total 98.02% 1.82%
Grand Total 98.45% 1.01%
(Source: Bankbazaar)
Factors to consider
When evaluating life insurance options based on CSR, policyholders should consider the following factors:
Consistency over time: Review CSR trends over several years to ensure the insurer consistently honours claims across different economic cycles.
Financial strength: Assess the insurer’s solvency ratio and financial stability to ensure they have the resources to settle claims, especially in unforeseen circumstances.
Transparency and customer feedback: Seek insurers that are transparent about their claims settlement processes and customer service standards. Additionally, consider reading customer reviews to gauge overall satisfaction with claim experiences.
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