Last Updated on May 24, 2022 by

Life insurance is supposed to provide financial insulation, but the point of paying high premiums becomes counterproductive if you cannot avail of them when needed. 

There’s a possibility that the insurer might reject your insurance claim. According to the Insurance Regulatory and Development Authority of India (IRDAI), in the year 2020-2021, 9,527 claims totaling Rs. 865 cr. were repudiated, while 3,032 individual life insurance claims amounting to 60 cr were rejected. 

And hence it becomes paramount to judge your insurance company thoroughly on what is called the – claim settlement ratio. One needs to be cautious while buying insurance because, in the quest of saving on premiums, you may opt for companies with low claim settlement ratios, but when needed, your claim may be rejected. 

Let us read this ratio and its implications in detail. 

What is claim settlement ratio?

Claim settlement ratio is arguably the most important metric to be considered before buying insurance. This ratio is used to gauge the percentage of claims paid by insurers. 

The claim settlement ratio vouches for the trustworthiness of the insurer. It extends your security that your claims won’t be rejected provided it is routed through genuine mode and backed by proper documentation.

How claim settlement ratio is calculated?

It is the ratio of the total claims paid by an insurer during the year to the total claims lodged. 

Claim settlement ratio = Total claims paid/ Total claims received

It is worth mentioning here that the claim settlement ratio is calculated for all the products offered by the insurance provider and not for every specific product. For example, assume that an insurance company received 100 claims during a financial year (for all the insurance products put together). Now, if the company pays on 96 claims and rejects the rest, the claim settlement ratio here would stand at 96%.

Significance of claim settlement ratio

Life insurance gives the assurance that in the unfortunate event of the insured’s demise, the dependents will receive some financial support from the insurance company. 

Even though insurance companies bind into agreements to compensate the insured, paying out claims is not financially fruitful for them. This is the reason why insurance companies might look to avoid claim settlements. Reasons could range from you concealing your medical history to furnishing wrong information while filling out the insurance. 

This is where the worth of claim settlement ratio is realized as it quantifies the genuineness and competence of an insurance company based on claims settled by the company in the past. 

Companies with a high claim settlement ratio naturally enjoy better market and customer trust. 

IRDAI is in the practice of bringing into the public domain the claim settlement ratios of all the insurance companies operating in India in the first month of each year. You should compare the claim settlement ratios of different insurance companies offering their services in the domain and then choose the appropriate insurance provider for yourself. 

How to interpret the claim settlement ratio? 

Which one out of the following according to you, is a more trustworthy insurance provider-

A company whose claim settlement range is around 89-95% over the last 5 yrs or a company 

that has a claim settlement range of 73-98% in the same time. Naturally, your choice would be the former as it has a smaller variance. Let’s understand this in a bit more detail. 

The thumb rule says- the smaller the range of CSR, the higher the degree of reliability. Because in the case of a company with a wider range of CSR you are always at the risk of being caught at the lower end of the CSR and the chances of your claim getting settled may go down significantly. 

Thus look for companies that maintain consistency in their claim settlement. It’s okay if, in the process, you have to forgo companies with exceptionally high CSR. Ideally, CSR for the recent 5 yrs should be checked. 

How to avoid your claims getting rejected?

Insurance companies may try to find loopholes or errors to reject your claims. If you don’t provide them with any strong reason to reject your claim, they are bound to compensate you. Following are some points you should ensure when purchasing insurance

Provide correct information

Always furnish accurate and up-to-date information. This may include your lifestyle, smoking, drinking habits, medical history, previous insurance policies, job profile, etc. Providing correct information regarding medical history may increase the premiums, but you should understand that this is one of those points which insurance companies widely use to reject claims. 

Fill out the nomination form correctly

Eventually, it is the nominee who’ll get the insurance claim; thus, providing the correct information in the nomination form is extremely important. 

Disclose any existing/previous insurance policy

Never hide anything from your insurer, as this may work against you. For instance, an insurance company can decline your claim stating “Concealment of material information” as a reason. If you have any existing insurance policy or you had some insurance policy from a different company, mention it clearly. 


The claim settlement ratio is a cornerstone metric that evaluates insurance companies based on the claims settled by them. Since the claim settlement ratio is calculated by IRDAI itself, it is unbiased and can be relied upon. Given the significance of the claim settlement ratio, insurance seekers should include CSR in their checklist while choosing among insurance companies. Alongside you also need to make sure that you abide by all the terms, conditions, and documentation formalities to avoid any discomfort while settlement of your claims.

Ayushi Mishra
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