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Why Is Claim Settlement Ratio Important?

Zopper Team Basics of Insurance January 15th, 2024
Importance of Claim Settlement Ratio

Establishing a consumer’s trust and financial resilience forms the crux of how insurance functions as its entire objective is to provide financial protection against any unexpected or unforeseen situations. Typically, financial security and tax benefits are a key reason for most Indian businesses and households to invest in insurance. 

Most importantly, the IRDAI’s Annual Report tracks and highlights the Claims Settlement Ratio of all life insurance companies. This reinforces trust, credibility and transparency in the insurance sector as it provides a clear picture of how insurers maintain their annual track record in claims settlement. 

For the years 2022-23, the IRDAI’s recent report highlights that around 86 percent of claims out of the total number of claims till March 31st, 2023, had been settled by insurers. For the aforementioned years, the general and health insurers settled approximately 2.36 cr health insurance claims, thereby making a payment of ₹70,930/- cr to settle health insurance claims. The average amount paid per health insurance claim has been pegged at ₹30,087.

What is a Claim Settlement Ratio in Insurance?

Simply put, a claim settlement ratio in insurance pertains to the percentage of insurance claims that an insurance provider settles out of the total number of claims that are received annually. 

When an insurer honours the claim of a policyholder, their confidence and financial stability is restored, which is one key reason why InsurTechs in India are gaining momentum in enabling faster claims process through technology. Minimising complexities in the claims process works wonders to augment the policyholder’s confidence and trust.

For instance, if an insurer says that their claim settlement ratio is 95 percent, it means that they have honoured 95 out of 100 claims that have been filed. Whether you are buying insurance or renewing it, an insurer’s claim settlement ratio is an important factor to consider.

Key Reasons Why a Claim Settlement Ratio Matters

Financial Security: This is a critical aspect for Indian businesses and households when they invest in insurance plans. The purpose of having insurance is to ensure there is financial security in case of an unexpected event such as a medical emergency or a sudden hospitalisation, etc.

Insurer’s Trustworthiness and Reliability: This is an important factor to consider while buying or renewing a new insurance plan. If an insurer has a longstanding record of high claim settlement ratio, it sends out a strong and reassuring message that they are unlikely to default when you raise a claim. 

Customer Satisfaction, Trust and Confidence: This is a critical factor when a customer decides to invest in an insurance plan. 

When Are Claims Rejected by Insurers?

Non-disclosure, mis-statement of facts or withholding important information can lead to claim rejection by insurers. To ensure transparent communication, make sure you check with your insurer first whether the hospital of your choice has not been blacklisted by them. 

Claim Settlement Ratio: Why Honesty is the Best Policy

A balanced approach is to keep everything clear and honest as insurance companies reject a claim when they sense that information is either withheld or not being shared with them.

Simply put, ‘honesty is the best policy’ while making claims. Notably, technology makes it easier to track any gaps or incorrect information that are provided during claims processes.

With the dynamic role of InsurTechs in India propelling insurance distribution across relevant digital gateways, new-age investors and businesses are showing increased enthusiasm and preference for smartly tailored solutions. InsurTechs such as Zopper have established clearly how technology simplifies the claims process, making it totally hassle-free, convenient and trustworthy for consumers. To explore relevant InsurTech solutions, book a demo instantly.

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