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| November 17, 2022

Claim Settlement Ratio - Importance, Process & How To Calculate?

The health and happiness of our loved ones is a goal closest to our hearts. But not everything in life goes to plan. In the event of a mishap, we would want our dear ones to be well taken care of. And providing a financial security net comes first on the priority list. An insurance policy is a financial tool to tackle challenging life situations. A life insurance policy ensures that your beneficiaries don’t have to compromise on their lifestyle after you are gone. Health insurance provides financial coverage for the medical needs of you and your family. Thus, you must choose the right insurance provider. A trustworthy insurance company goes a long way in reducing the financial burden on your family.

What is a Claim Settlement Ratio?

The claim settlement ratio (CSR) is a metric used to measure the percentage of insurance claims an insurer settles during a financial year compared to the total claims. This includes pending insurance claims from the previous year. The claim settlement is the final stage of the claim process in insurance. The CSR is an indicator of the credibility of insurance companies, mostly life insurance and health insurance. A company with a high insurance claim settlement ratio means that it has a better track record of satisfactorily settling claims.

An Incurred Claim Ratio indicates the capability of an insurance company to settle claims. It is calculated based on the total value of all claims paid by the insurer divided by the total amount of premium received by the insurer in a financial year. On the official website of the Insurance Regulatory and Development Authority of India (IRDAI), you can check the claim settlement ratios of health insurance companies as well as the claim ratio of life insurance providers.

Calculation of Claim Settlement Ratio

The following formula is used to calculate CSR: (Total number of claims settled in a year / Total number of claims in a year) X 100 = Claim Settlement Ratio (CSR)

Importance of claim settlement ratio

An insurance policy is an assurance that in an unforeseen circumstance, the insured or the beneficiaries will be able to claim the insurance coverage. This, in turn, will help them look after their current and future financial needs in the absence of the insured. The most reliable insurance companies will have the best claim settlement ratio in the industry. Hence, being aware of the health insurance provider’s claim settlement ratio or claim ratio of your life insurance company is paramount.

  • Ensures and assures the financial security of your entire family.

  • Representative of the company’s process efficiency and good customer service.

  • Indicates a comparatively smoother and more straightforward claim process.

  • Indicates an insurance company's potential to pay the sum insured to the policyholder (in case of health insurance) or the nominee (in case of life insurance).

  • A high claim ratio of a Health Insurance Company helps you attend to medical emergencies without any inconvenience.

  • A claim settlement ratio higher than 80% is considered good. Companies with over 90% CSR will offer great value products.

Process of Claim Settlement

There are four basic steps in settling an insurance claim:

  • Claim intimation/notification: The health insurance or life insurance claimant must inform the insurer of his/her claim along with basic information such as policy number, name of the insured, name of the claimant, etc.

  • Submission of Documents required for claim processing: The claimant will be required to provide a list of documents according to the insurance policy availed.

  • Settlement of claim: An insurer is legally bound to settle a claim within 30 days of receipt of all documents including clarification sought by the insurer. Even if the claim requires further investigation, the settlement should be made within 90 days.


When purchasing an insurance policy, it is prudent to understand in detail the insurer’s policies and coverage options. Checking the insurer’s claim settlement ratio is critical to not getting your claims rejected and receiving the benefits due to you or your family.

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