When you’re dealing with a life insurance company, you may have heard of a term known as the ‘claim settlement ratio,’ or if you haven’t, it’s essential that you do. A claim settlement ratio is incredibly important to think about when it comes to choosing a life insurance provider, or any other type of insurance, including ULIP savings plans, health insurance, term insurance, and more.
In today’s guide, we’re going to talk you through what a claim settlement ratio is, why it’s important to think about, and everything else you need to know.
So, what is it?
A claim settlement ratio basically refers to the number of claims of which an insurance company has passed in a certain amount of time. So, for example, if you look at the number of claims in a company over the course of a year and they had 400 claims, and they only passed four of them, this is incredibly worrying, and you’ll want to consider whether this is a company you actually want to use for your own insurance policies.
This is vital because if you’re a policyholder with an insurance company, you want to know you can trust them that when something bad happens and you want to make a claim that the company is actually going to be there for you and help you out.
Say you took out a life insurance policy, and you passed away, and the insurance company refused to pay out the claim to financially support your loved ones. It’s not on and causes a ton of problems, yet some insurance providers do this, so you need to be aware of which ones they are so you can avoid them.
This means looking at the claim settlement ratio. This figure is typically offered as a percentage, which is worked out by the total number of claims approved over a certain period of time, divided by the total number of claims the insurance provider received. You can then use this figure as aa kind of yardstick to see how reliable a company is at passing insurance claims and whether you’ll be protected.
A good claim settlement number to look for will be any figure above 90%. Above 95% is ideal, and 100% is perfect, although this is probably never going to be the case unless you’re looking at a really small timeframe.
It’s important to remember that claims do get rejected all the time for various reasons, including breaking the rules and conditions of the original policy, someone hiding their medical history or being proven guilty in court for whatever the case may be, or providing missing or wrong information on their original insurance policy documentation.
However, these tend to be rare cases.
So, next time you’re looking to buy an insurance policy, and you’re unsure about whether the provider is right for you, take a look at their claim settlement ratio and see what kind of passing claims they offer. If anything seems out of the ordinary, you’ll know to look elsewhere for a much better provider who will treat you better.
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