Claim settlement ratio may be good, but it doesn’t indicate overall health of insurer

Your life is precious and so is your dear ones’. You might be living a plush and luxurious life with your family at present, but the time is not always the same. An accident, death of a loved one, or illness is enough to change the course of life for your closed ones, both emotionally and financially.

Even though the thought may sound morbid, but such a situation could affect almost anyone. Hence, there is a need to be prepared and secure the life of your family with an insurance cover. While it protects against the death risks for your entire life or for a specified period, it provides financial security to your beneficiary in the event of your sudden demise.

List of Life Insurances Plans

With various insurance plans offered by numerous insurance companies in India, it is essential to know which one could benefit you the most. Here is a quick look.

• Term Insurance: This plan covers the beneficiary for a specific period after your death and provides the sum assured in annual/monthly installments, lump sum, or in a combination of these two options. You need to continue paying the premiums. However, if you survive the policy term, there won’t be any financial benefit.
• Endowment Plan: This insurance offers a lump sum amount as the sum assured to the beneficiary if the insured person dies within the term period. As a plus point, it also provides the sum assured as life cover and the accumulated bonus if the insured survives the term period, unlike the term plan.
• Unit Linked Insurance Plan or ULIP: This plan involves paying a part of the premium towards the insured’s life cover. The insurer invests the residual part of the premium in debts and equities on the consent of the policyholder, in accordance with the market volatility. The insured bears the investment risks.

Besides the above-discussed plans, you may also consider investing in several other plans and policies, such as:

• Money-Back Life Insurance
• Whole Life Insurance
• Child Insurance
• Pension Plans

All these plans bring several benefits and risks, hence, make sure to get in-depth information about them before opting for one.

Choosing the Best Insurer

Now that you know about different insurance plans that can offer financial security for your family in case of your unfortunate death, the next thing is to choose from the best insurance companies in India. Numerous factors are worth considering in this regard since you don’t take insurance every now and then. Amongst all of them, Claim Settlement Ratio or CSR is one of the prime indicators of the insurer’s ability to approve the claims.

What is the Claim Settlement Ratio (CSR)?

The Insurance Regulatory and Development Authority of India or IRDAI publishes its annual financial year report every year. Among all the other aspects, it also highlights the CSR, which refers to the ratio of the death claims settled by the insurer to total death claims received.

Claim Settlement Ratio = Claims Approved (paid to the beneficiary of the insured) / Claims Received by the Insurance Provider.

Here, the total death claims received by the company include the claims made in the current fiscal year, in addition to the claims pending at the year’s beginning.

As per most of the financial experts, Claim Settlement Ratio acts as a befitting indicator of the way a company handles the death claim settlements. The insurance provider has the highest claim settlement ratio has the best chances of claim settlement. Now though CSR is good, it does not give a clear picture and misses certain considerations:

1. The CSR includes all policies offered by the insurer, whether ULIPs, endowment, term insurance plans or any other insurance
2. The company’s reason for rejecting the death claims also remains hidden

Hence, while CSR is a dominant factor, certain other pointers are equally important in comparing several insurance companies in India and evaluating their overall feasibility. Some of these factors are as follows:

1. Insurer’s Ratings: This defines the financial stability of a company. You can find out the rating of the insurance companies online.
2. Adherence Level: Check if the shortlisted insurance companies are able to adhere to the insurance requirements set forth by the insurance regulator IRDAI.
3. Expertise: Make sure that the company holds enough expertise in the area in which you want insurance.
4. Transparency: Browse through review and complaint websites to know about the feedbacks of your shortlisted insurers. Your decision-making could get big thumbs up through this factor.
5. Features and Insurance Riders: You can compare various insurance companies in India to know about the features they are offering for your preferred insurance. Moreover, knowing about the add-ons or riders that further improve your basic insurance coverage is also important.

Consider all these factors, and once you are confident about your decision, you are all set to invest in the chosen insurance. May your investment bear fruits in the long run.