When it comes to selecting the right term insurance policy, the ultimate goal is clear: to secure peace of mind for your family. After all the research and decision-making, the last thing you want is for your loved ones to struggle when it’s time to claim the benefits. So, how do you choose the right insurance company that will make the process as smooth as possible?
One term that always comes up in discussions when you seek advice on which company’s policy you should buy is the ‘claim settlement ratio’.
What is a claim settlement ratio?
In simple terms, the claim settlement ratio is the number of claims an insurer has settled compared to the number of claims they received in a financial year. For example, if an insurer has a claim settlement ratio of 98%, it means they settled 98 out of every 100 claims they received during that year.
Sounds promising, right? But as Aayush Dubey, Co-Founder & Head of Research at Beshak.org, points out, “This ratio alone doesn’t tell the whole story.” He explains that it doesn’t guarantee that your family will have an easy time when it’s time to file a claim. “Just because an insurer has a high claim settlement ratio doesn’t mean your claim will be approved without a hassle,” he adds. The ratio reflects past settlements and doesn’t promise future outcomes.
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Let’s dive deeper into why relying solely on the claim settlement ratio might not be the best approach.
The limitations of claim settlement ratio:
According to Dubey, there are several reasons why the claim settlement ratio might not be the most reliable metric to base your decision on:
It doesn’t account for claim amounts
An insurance company could have a high claim settlement ratio by settling numerous small claims while rejecting larger ones. “While that percentage looks impressive, the actual money paid out might be quite low,” Dubey notes.
It doesn’t show processing time
Some insurers might have an excellent settlement ratio but take an inordinate amount of time to process claims. “Would you prefer a company with a 99% ratio that takes 4+ weeks to settle a claim, or one with a slightly lower 98% ratio that wraps it up in just 1 week?
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