Buying a term insurance policy is one of the most important financial decisions you’ll make, especially if your family depends on your income. But if you’re choosing a policy based only on a company’s claim settlement ratio (CSR), you could be missing the bigger picture.
The CSR is the percentage of claims an insurer settles out of the total claims received during a financial year. A high CSR reveals an insurer’s commitment to honouring claims. Therefore, customers must look at trends over multiple years rather than a single year’s CSR.
But there are 4 more metrics that provide a clearer picture of an insurer’s financial strength and service quality than the claim settlement ratio alone.
After all, term insurance is a long-term financial promise meant to protect your loved ones. Spending a little extra time evaluating the right parameters today can help ensure that your family doesn’t face unnecessary hurdles during an already difficult time.
For any customer buying term insurance, it is important to choose the insurer across multiple parameters that reflect both financial strength and customer experience.
Before you purchase your next term insurance policy, here are four key metrics you should check instead of focusing only on the claim settlement ratio.
1. Amount Settlement Ratio (ASR): It is the percentage of the total value of claims paid out by an insurer compared to the total value of claims received. While the Claim Settlement Ratio (CSR) tells you the percentage of claims settled by the insurer, the Amount Settlement Ratio reveals how much of the total claim amount the insurer actually paid to policyholders or nominees.
2. Complaints Ratio: When purchasing a term plan, an insurer’s complaint ratio provides insight into their customer service quality. A lower complaint ratio generally suggests smoother onboarding, policy servicing, claims handling, and grievance resolution. Thus, customers should evaluate the nature of complaints, not just the volume.
3. Solvency Ratio: The solvency ratio reflects the financial health of the insurer and its ability to meet long-term obligations. A stronger solvency ratio means the company has sufficient capital reserves to honour future claims, making it an important indicator of long-term reliability.
Key takeaway
Term insurance is a pure life insurance product that provides financial protection to your family for a fixed period (the policy term) in exchange for a fixed premium. If the insured person dies during the policy term, the insurer pays the sum assured to the nominee. If the policyholder survives the term, no maturity benefit and no return of premium is paid under the plan.
While buying a term life insurance plan, looking at multiple ratios can help you make a more informed decision and reduce the risk of unpleasant surprises when your family needs the claim amount the most.
“In case the customer doesn’t evaluate the above metrics before buying term insurance, their family/nominee might have to go through a tough time at the time of the claim. They might face delayed financial support or struggle to meet everyday expenses, EMIs, children’s education costs, or other financial obligations,” said Varun Agarwal, Business Head – Term Insurance, Policybazaar.
Term insurance claims may be rejected for a variety of reasons, such as failure to disclose material information, providing incorrect or incomplete details in the proposal form, not declaring existing or previous life insurance policies, and failing to update nominee details. Claims may also be denied if the policyholder conceals pre-existing or critical illnesses, misses premium payments leading to policy lapse, or does not disclose lifestyle habits such as smoking, tobacco use, or alcohol consumption.
In addition to making all relevant material disclosures, keep the insurer’s ability to pay claims in consideration.
Checking all the above ratios allows the insurer a more comprehensive assessment of an insurer’s reliability and can help you choose a policy that offers genuine financial security.
Disclaimer: This article is for informational purposes only. Insurance benefits, claim settlement, and policy terms vary across insurers. Please read the policy document carefully and seek professional advice before making any insurance purchase.
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