Always check the Claim Settlement Ratio before buying Life Insurance

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Once you have decided that you wish to opt for a life insurance policy, the biggest confusion is – Which is the best Life Insurance Company?

There are many insurance companies in India that offer Life Insurance policies which makes it difficult for a person to choose the best for him.

Almost all the insurance companies are now selling insurance policies online as well as through insurance advisors. Irrespective of whether you opt for a life insurance online or through an insurance advisor – you should always check the key aspects of the insurance policy along with the past record of the insurance company.

Once you have opted for a life insurance policy, you don’t change it every year. An insurance policy is basically a commitment wherein you pay the insurance company annually/monthly and they will repay you in case of any unfortunate occurrence in your life.

Deciding the insurance company is a one-time effort, the benefits of which you will reap in the long term and therefore it is advisable to conduct proper research before finalising the company.

Some people make the mistake of opting for an insurance company with

  1. Lowest Insurance premium
  2. Highest Benefits and Policy Value

However, these should not be the only criteria while opting for any insurance policy. Before finalising any insurance policy, it is very important for the individual to also check the Claim Settlement Ratio of the Insurance Company.

What is Claim Settlement Ratio?

Claim Settlement Ratio means the percentage of death settlement claims settled by the insurance company in the past. The computation of the claim settlement ratio is done as follows: –

Total No. of Death Claims settled
Total No. of Death Claims received

For example, if a life insurance company receives 1000 claims and the insurance company settles 980, the claim settlement ratio of the company in such a case would be 98%. The higher the claim settlement ratio – the better it is for the individual.

The claim settlement ratio of all insurance companies is published by IRDAI in their annual report and the same can be accessed through this link: https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_NoYearList.aspx?DF=AR&mid=11.1

How to track the Claim Settlement Ratio

The claim settlement ratio of all the insurance companies is mentioned on the website of the insurance company. In case you are opting for an online term plan – you can easily check this on the website of the insurance company.

In case you are opting for a life insurance policy through an insurance advisor – you should check this with your advisor before opting for the insurance plan.

The claim settlement ratio can also be accessed from the website of the Insurance Regulatory Development Authority of India (IRDAI). IRDAI is a government body entrusted with the task of regulating and promoting insurance in India. The comprehensive list of the historical and current claim settlement ratio of all the insurers is also published in the annual report of IRDAI and can be downloaded from their website.

Why don’t Insurance Companies settle all Claims?

All insurance claims are never entertained by the insurance companies. There are always some insurance claims which get rejected.

Some of the most popular reasons for rejection are: –

  1. The reason for death was not insured and covered by the Insurance Policy
  2. Wrong disclosure of facts by the policy holder in the proposal form

Can your Claim be denied on the basis of wrong disclosure of facts?

Yes, if there is some wrong disclosure of fact in the insurance policy – the insurance company can deny your insurance claim.

However, the good part for the consumers here is that if you have not properly disclosed all the facts to the insurance company – it is the responsibility of the Insurance Company to check all the facts within a period of 3 years only.

As per Section 45 of the Insurance Act, “No Policy of Life Insurance shall be called in question on any ground whatsoever after the expiry of 3 years from the date of the policy i.e. from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later”.

Therefore, it is the responsibility of the life insurance company to dig deep into all facts and get them verified themselves within 3 years. If they come to know about wrong disclosure/non-disclosure of facts after 3 years– they cannot deny your insurance claim on the basis of wrong/non-disclosure of facts.

Conclusion

The claim settlement ratio is a very important factor to be kept in mind while opting for any insurance policy. However, the claim settlement ratio is just raw data and it will never show the real picture i.e. what was the reason behind the claim getting denied.

The claim may be denied either because of the fault of the applicant or the insurance company. Moreover, this ratio does not give segmented results on what was the claim settlement ratio of different products like ULIPS, Term Insurance etc. It only gives the overall claim settlement ratio and not the product wise results.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.