Good News for Insurance Buyers! Indian Insurers Raised Bar with Record High Claim Settlement Ratios

Any financial plan includes two key aspects – growth and protection. While growth can be achieved through various investment options, protection can only be achieved through purchase of adequate insurance, hence, life insurance is essential. There are numerous life insurance plans from different insurers competing for your attention but zeroing on a specific one that suits your needs can be tricky. 

Currently, one of the widely used criteria while comparing the plans and performance of different life insurance companies in India is the ‘Claim Settlement Ratio’ or ‘Death Claims Paid Ratio’. Let’s take a closer look at what claim settlement ratio is, the implication of a high or low ratio, performance of leading insurers on the basis of these ratios and more.      

Meaning and Implication of CSR in Life Insurance

Life Insurance is based on a relatively simple premise – an individual (i.e. policyholder) signs a contract with an insurer and promises to pay a fixed sum periodically as premium to the insurer for a pre-determined period. In return the insurer promises that if the policyholder dies while the life insurance contract is in effect and a claim is made by the nominee/beneficiary of the contract, a pre-determined sum of money will be paid to the claimant. 

Claim settlement ratio (CSR) or Death claims paid ratio (CPR) can provide helpful insight in this regard. The CPR tells you how well the insurer has kept its promise of making payouts to the nominee/beneficiary of the policy after a claim has been made. 

So, a higher settlement ratio implies that the insurer has stayed true to its promise of making payouts in the case of a valid claim, while a lower CSR implies that the insurer has either delayed payments or rejected claims in a higher number of instances. 

From the perspective of a policyholder, you are seeking to protect your family’s financial future in your absence. So you would definitely prefer to purchase a plan from a life insurance company that pays out death benefits with minimal delays and is less liable to reject an insurance claim. So, the higher the individual death claims paid ratio of a life insurer, the more desirable it is from the policyholder’s perspective.   

A Snapshot of Claim Settlement Ratio Number of Leading Private Insurance Companies in India

Claim settlement ratio are initially reported annually in the audited financials that have to be mandatorily declared by every life insurance company operating in India and included as part of its public disclosure. Subsequently this data is collated by the IRDAI and published in the IRDAI Annual Report for the applicable financial year. 

The table below shows the current CSR reported in the audited financials of some leading insurance companies in India and the CSR numbers of these insurers in the previous 2 years: 

*Individual Death Claims Paid Ratio

Sources: ^{^}As per IRDAI Annual Report for FY 2023-24.

^#As per IRDAI Annual Report for FY 2022-23.

^@As per respective companies’ annual audited Financials for 2024-25.

You will notice these all leading insurance companies have managed to improve their CSR numbers in FY 2024-25 as compared to FY 2023-24. Among these, two insurers Axis Max Life Insurance and HDFC Life stand out with individual death claims paid ratios of 99.70% and 99.68% respectively. 

What’s more this is not a one-off, both insurers have been continuously improving their CSR performance year on year with Axis Max Life managing to hold on to its leadership position by varying margins over the past 3 years.  Let’s take a closer look at the CSR calculation to see how we arrive at the above figures. 

How Claim Settlement Ratio is Computed?

This simple formula shared below can be referred to calculate the claim settlement ratio by insurance companies. For a particular financial year (FY)

Claims Settlement Ratio = [(Total No. of Claims Paid by the Insurer) / (Total No. of Claims Received by the Insurer + Claims outstanding at the beginning)] X 100

To understand this calculation better, let’s take an example. Suppose a life insurer received 10,000 claims in a financial year and settles 9998 of these claims in the FY. In this case, the CSR of the insurer for the FY will be = [9998/10000] X 100 = 99.98%. 

So, a higher claims paid ratio shows that the insurer has made a payout for a higher number of claims it has received during the financial year. Which implies that in the event of your death, your policy nominee has a higher chance of receiving the life cover amount after making a claim. 

Factors to Consider in addition to CSR when comparing Insurers

There is no denying that knowing and understanding claim settlement ratio is essential when you are comparing and purchasing life insurance policies from different insurers. However, one should not make such an important decision based on just a single criterion. Below are some other factors to consider before making the decision:  

• Track record of settlements: Considering the CSR number for just one specific year is not enough, do check the track record of the insurer over at least the past 5 years. An insurer that consistently improves its CSR over the years indicates that it is committed to improving the efficiency of its claims settlement process so that their services continuously improve with time. 
• Transparency: Companies that have achieved high claim settlement ratio tend to be transparent about their achievements and prominently display the CSR number on their website and in various customer communications. This transparency is way for the insurer project the trust they want to inspire among their current and future prospective policyholders.     
• Financial Status: The audited financials of a life insurance company contains many other key information apart from CSR. One of these is the solvency ratio – a measure of the financial status of the company. Insurers with solvency ratio that is higher than the IRDAI mandated 150% are considered financially strong and are more likely to be able to make promised payouts in the future. 
• Customer Experience: It is important to know how other current and previous policyholders perceive the insurer based on their experiences. Ask friends and family who have previously associated with the insurer and also check online forums to get a clearer idea of how the insurer is perceived, before making the final decision. After all, a death in the family is always a tough situation, compounding that with a poor customer service experience is definitely not desirable.       

Things to Ensure Smooth Claims Settlement Experience

The importance of due diligence when making a long-term commitment like purchasing a life insurance policy cannot be overstressed. But, you also need to make sure that you are providing correct and complete information to your insurer so that the future claim experience is smooth and hassle-free. Here are the few pointers to keep in mind:   

• Updated address/contact details: Life is uncertain and prone to change and it is quite possible that you have changed addresses or even your phone number/email after purchasing your life insurance policy. Make sure you check your contact details as per insurer’s records and get any missing/outdated information updated in your policy at the earliest.   
• Updated nominee details: Key information such as names and contact details of your nominee(s) should be kept updated in your policy at all times. This is essential not just if you are adding or removing nominees to your existing policy but can also help your insurer easily get in touch with the nominee to facilitate the claims process, if necessary.    
• Provide Accurate Disclosures: A common mistake that prospective policyholders make when purchasing a life insurance policy is attempting to suppress information regarding lifestyle choices. This include practices such as tobacco usage, alcohol consumption, family history of diseases such as cancer, etc.

If such information is discovered at a later date by the insurer, it may be sufficient grounds for denying a claim. So, it is best to be truthful about all details required at the time of insurance purchase to ensure hassle-free claims in the future.

Disclaimer:

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