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General insurance refers to non-life insurance products, and people buy such policies to cover losses or damage to goods or assets. Besides, general insurance policies are purchased to cover financial costs incurred because of specific dangers. For instance, a fire insurance policy provides protection against financial losses suffered because of a fire accident, while a health insurance policy reimburses the cost of medical expenses incurred due to an accident, illness, or disease.
The aim of this post is to highlight some important facts about the general insurance claim settlement ratio. This is not the only factor that you must consider when purchasing a general insurance policy, but understanding the facts related to the claim settlement ratio helps you make an informed decision. Read on to learn more about the claim settlement ratio.
In general insurance, the claim settlement ratio refers to the percentage of claims that have been paid out by an insurer compared to the total number of claims that have been received in a financial year. This ratio is considered a reliable metric to determine whether an insurer will come to your rescue as and when a need arises. When choosing an insurance company, it is always best to opt for one that has a good claim settlement ratio. Furthermore, the Insurance Regulatory and Development Authority (IRDAI) of India releases claim settlement ratios of insurance companies on an annual basis.
The formula for calculating the claim settlement ratio is as follows:
Claim settlement ratio = (Total number of claims settled in one year / Total number of claims received in one year) × 100
As an important factor, the claim settlement ratio indicates an insurance company’s claim resolution pattern. This is because insurance is a promise to help you when you suffer a financial loss due to an event. Therefore, it is important that you verify or ascertain whether the insurer from whom you want to buy general insurance will keep up the promise or not. An insurer’s claim settlement ratio, therefore, gives you confidence that the company will settle your claim.
The objective of purchasing general insurance is to ensure that you are financially protected against unforeseen circumstances. The purpose will not be served if the insurance company does not honor and settle your claim. An insurer that honors and settles most of the claims filed by their customers gives you and your family the opportunity to enjoy a simple, hassle-free, and transparent claims process. Furthermore, you can be confident that you and your loved ones are faced with a tough time in getting the claim settled.
Besides, the claim settlement ratio gives you an indication as regards the ability of the insurer to settle a claim with you or a nominee. If the insurance company has been consistently maintaining a high claim settlement ratio for a considerably long period of time, it is likely to be reliable and unlikely to shy away from meeting the compensation commitment.
The ultimate goal of buying general insurance is claim settlement. It means providing compensation to general insurance policyholders for damage or loss suffered by them. In the case of vehicle insurance, there are two options for claim settlement: cashless claim settlement and reimbursement claim settlement. The former option is the most preferred option. That said, the higher the ratio, the better the chances of settlement of your claim by the insurer. As such, you should look for an insurance company with a claim settlement ratio of 85 percent or above.
That said it pays to be aware of the drawbacks of the claim settlement ratio. It relies on a number and not the amount. It gives you an idea as to what percentage of the total number of claims received in a year has been settled by an insurer but doesn’t reveal the amount that has been settled in claims. Secondly, it does not measure the company’s efficiency of the process of settlement of claims.
When you register a claim, the insurance company will give you a reference number. This is referred to as the claim number, and you can use it in all correspondence related to your claim.
You should inform your insurer as soon as possible about the accident that has happened. The company will assign a claim number and ask you to choose between a cashless or reimbursement claim. Then, proceed as per company guidelines.
The two most common mistakes committed by policyholders are:
An insurer is considered trustworthy if the ratio is at least 85%. Besides, you should check an insurer’s persistence ratio.