Life insurance helps in meeting the commitments through adequate availability of funds in spite of any mishap.
The primary objective of buying a life insurance scheme is to provide financial security to the family members in the event of the death of the earner. The calculation of life insurance plan is done on the basis of future goals, inflation and other daily requirements.
Life insurance helps in meeting the commitments through adequate availability of funds in spite of any mishap. The Insurance Regulatory and Development Authority of India has notified the Death Claim Settlement Ratio of life insurers for the year 2020-21.
What is Claim Settlement Ratio –
The family of the insured should get the sum assured as it can be a make-or-break situation for them considering the fact that the family will depend on this money in future.
Naval Goel, Founder and CEO, PolicyX.com, said that the claim settlement ratio is historical data that translates to the company’s ability to honor claims. Based on the history of the insurance company, the insured can predict the future of the claim whether it will be honored or not.
High claim settlement ratio reflects credibility by demonstrating that the insurance company has successfully settled most of the claims made by its customers. And a low claim settlement ratio indicates inefficiency of the insurance company as the insurance company has not successfully settled the claims.
How is it calculated?
The claim settlement ratio is calculated by dividing the total number of death claims by the total number of claims settled.
Formula- Claim Settlement Ratio (CSR) = (Total number of claims settled in a year / Total number of claims in a year) X 100
As per IRDA Annual Report 2020-21, the claim settlement ratio of LIC was 98.62 per cent as on March 31, 2021, while it was 96.69 per cent as on March 31, 2020 and the claim settlement ratio declined to 1.0 in 2021 . Which was at 1.0 percent last year.
Goyal said that the claim settlement ratio of private insurance companies was 97.02 per cent during 2020-21 (97.18 per cent during 2019-20) and the rejection ratio in the year 2020-21 has come down to 2.0 per cent from 2.50 per cent in the previous year.
The segmentation ratio of the life insurance industry increased to 98.39 per cent in 2020-21 from 96.76 per cent in 2019-20 and the rejection/rejection ratio declined to 1.14 per cent from 1.28 per cent in 2019-20.
