Here’s everything you need to know about term insurance claim ratio to derive all the benefits from it. Read now to learn more
Most people already know the various benefits of getting a term insurance plan or a unit-linked insurance plan. If getting income tax benefits, critical illness coverage, accidental death coverage, were not enough to lure you into getting a term life insurance plan, most companies are now getting customers by showing off their claim settlement ratio, based on the IRDA Life Insurance Claim Settlement Ratio.
What is the claim settlement ratio?
In simple words, it is a measure of the number of claims an insurance company settles or ignores. It is calculated by the number of death claims an insurance company settled in one financial year, against the total number of claims they received. For example, if an insurance company got 50 death claims for the year, and they settled 49 of them, that means their claim settlement ratio is 98%.
The claim settlement ratio or the Claim Settlement Ratio indirectly shows how customer-friendly an insurance company is when dealing with death claims. This ratio is calculated as a percentage annually as per the regulations of the Insurance Regulatory Development Authority of India, IRDA and the information is available in the public domain.
Significance of Claim Settlement Ratio
As mentioned above, Claim Settlement Ratio indirectly helps the user understand if the insurance company which they are buying the term life insurance plan from, is customer friendly or not. It basically is a numerical measure of the number of times an insurance company received death claims from the next of kin of the insurance and honoured the deal. As a general rule, if a company’s claim settlement value is more than 85%, it is good.
There are several reasons why Claim Settlement Ratio plays an important part when you are looking for a term life insurance plan or unit-linked insurance plan:
- Claim Settlement Ratio is not just limited to term insurance plans alone
The concept of Claim Settlement Ratio is not just calculated for death claims. It is calculated for all kinds of life insurance products. Users can even check the Claim Settlement Ratio before going for ULIP plans. Most of the customers buying life insurance do not buy it looking forward to the claim settlement, but more as an investment. Thus, many of them even prefer going for the unit-linked insurance plans of term life insurance, so that they can invest as well as pay the premiums.
- Early claims are processed faster
Early claims are when an individual ends up making a claim just after 2 years. While most seasoned insurance companies are well aware of the impacts of settling early claims faster, most new insurance companies go for settling the early claims faster than the non-early ones, which reflects negatively on their claim settlement ratio.
- Vigorous sales may lead to fraud claims
The main goal of most insurance companies is to sell the maximum number of insurance claims to as many users as possible. Most of the time this leads to quite a significant number of insurance claims that are fraud in one way or the other. Since the Claim Settlement Ratio not only measures the percentage of claims settled but also other aspects like the ratio of claims pending and the ratio of claims that were rejected, users can easily understand the kind of policyholders in a company and make their decision accordingly.
While claim settlement ratio is not the only thing that one needs to consider before buying a term life insurance plan or a unit-linked insurance plan,it does help in the decision making process. Considering all the various aspects of the plan as well as the insurance providing company is essential before one even thinks of investing in any life insurance plan.
Factors that influence Claim Settlement Ratio, Claim Settlement Ratio
The best way for policyholders to utilise Claim Settlement Ratio for their benefit is to have proper knowledge of the various factors that affect the Claim Settlement Ratio of term life insurance plans and ULIPs. Some of the most significant factors that influence the Claim Settlement Ratio of a company are:
- Non Disclosure of the complete scenario
Often, policyholders when buying a new policy, tend to hide previously prevailing health issues or medical conditions that are covered under the policy. When caught, these claims are immediately rejected by insurance providing companies and this ends up impacting their Claims Settlement ratio negatively.
- Ignorance on policy holder’s part
Many times, the policyholders aren’t clear, well informed or ignorant about the terms and conditions of the term insurance plan, Unit-linked insurance policy or any other policy, which leads to failure in following the rules. Ignoring any of the clauses when buying the policy can end up backfiring at the time of policy claims.
- Errors in nominations/updates
Many times, policyholders overlook filling up the nomination column in the form or fill in inaccurate details or fail to update the details for the nominee. This becomes inconvenient at the time of insurance claims, when the nominee approaches companies for the claim, but can’t procure the claims due to incorrect or old information mentioned in the document.
- Fraudulent practices
At times, users simply buy a policy for the sake of it without reading all the terms and conditions, then make ridiculous claims without going through the rules and regulations. Some even go as far as staging a scenario to claim insurance. These claims are sooner or later identified and rejected immediately.
All these factors end up pulling down the Claim Settlement Rate of policy proving insurance companies. Thus, users need to check all aspects of the insurance plan, before jumping to any conclusions about the insurance company based on their Claim Settlement Ratio only.
The ideal insurance plan
If you are looking forward to buying a new insurance plan, we would suggest going for the Canara HSBC Oriental Bank of Commerce Life Insurance Plans. The most prominently visible benefits of the plan include a whole life cover for policyholders up to the age of 99 years and up to 1 crore life cover claim. With their impressive Claim Settlement Ratio of 98.12%, you can be sure to get verified claim settlements, in case of the accidental death of the policyholder. Apart from this, the plan also offers impressive tax savings, all at the cost of affordable premiums for 5 years.