What is Claim Settlement Ratio and Why is it Important?

Created on 09 Jul 2020

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Updated on 11 Sep 2022

Life Insurance policies are long-term contracts with an insurance company. In exchange for a certain amount of premium payments, the life insurance company would provide a lump-sum amount to beneficiaries in the event of the insured's death. This lump-sum amount is known as a death benefit, and it would help the family of the insured financially during tough times. So, it is essential for the beneficiaries that their claims are paid to them in full and promptly during these challenging times.

Life Insurance companies give out insurance to policyholders so that they can pay the claims when needed, and they endeavor to do so. But this is not always the case. Due to several reasons, Life Insurance companies may not always be able to settle their claims.

For this reason, the IRDA publishes a report of Claim Settlement Ratios (CSR), where they calculate the proportion of claims that the company has settled. These ratios for all life insurance companies are published by IRDAI annually and are known as IRDAI'S Claim Settlement Ratios.

What is Claim Settlement Ratio?

This is a ratio that measures the number of claims that are accepted and paid by the company. We can define it as the ratio of the number of claims settled to the number of claims that the company receives.

Claim Settlement Ratio = (Number of claims approved/Number of claims received) * 100

This is quick and easy to calculate and is expressed in the form of a percentage. It is also generally seen that the higher the ratio, the better.

For example, if there are 100 claims that a company receives, but the company can pay back only 97 of them, then the Claim Settlement Ratio is 97%.

Importance of Claim Settlement Ratio

Claim Settlement Ratio is an essential factor that needs to be considered before going ahead with purchasing any insurance plan. It shows the buyer that the company is reliable and trustworthy. For this reason, it serves as a useful measure of the credibility of the company.

Generally, a higher ratio would mean that a larger number of claims are being settled and would be a good indicator for the buyer of the plan, and a smaller ratio would be an unfavorable outcome to them. 

However, CSR should not be the only factor in measuring the performance of the company. For example, if a company receives 100 claims and settles 97 out of them, its CSR would be 97%, which is good. However, the number of claims that the company received is small in number. Let's consider another company that received 10,000 claims but was only to settle 9400 out of them. Their CSR is 94%, which is lower, but the number of claims received by this company is higher. Hence, one should look at the CSR and look at the number of claims that are being made.

Another thing to note would be that the claim settlement ratio is measured for all the company products put together and not just a single product.

So, it is essential that before buying any insurance product, a buyer should look at the claim settlement ratios that a company has achieved over the years and check the consistency of these ratios as well. Consistent ratios would mean that the company is more trustworthy.




CLAIM SETTLEMENT RATIO (% of the amount)


TATA AIA Life Insurance




HDFC Life Insurance




Max Life Insurance




ICICI Prudential Life Insurance




Life Insurance Corporation




Reliance Nippon Life Insurance




Kotak Life Insurance




Bharti Axa Life Insurance




Aditya Birla Sun Life Insurance




Exide Life Insurance



According to IRDAI's report of 2018-19, these are the companies with the highest CSRs.

Another thing to look at while analyzing these ratios is the amount of the claims that are settled. It is often seen that many insurers pay the claims of policies with lower values, but it is usually the policies with higher values that remain unsettled. This could be understood with the help of an example.

For instance, out of 100 claims, a company has 95 that are traditional life insurance with low amounts, say an average of Rs. 5 lacs, while there are five high amount term insurance plans with an average amount of say Rs. 1 crore. If a company settles 95 of the traditional plans, then it has a 95% ratio, which is favorable. However, out of the total amount of Rs. 9.75 crores, only a claim of Rs. 47.5 lacs were settled, which is 48.72 %. So one also needs to see the claim settlement ratio as per the benefit amount.

Why do claims get rejected?

As a policyholder, it is important to understand that the claim settlement ratio is not the only relevant factor. A good percentage does not guarantee that one of the insurance companies will get our claims settled. As a policyholder, we must also try to minimize any chances of our claims getting rejected by the company. To do so, we must also understand why our claims may get rejected. The reasons for the rejection of claims are:

  1. Hiding medical history - This is one of the major reasons for claims getting rejected. One must never try to hide any medical issues or previous illnesses. Any habits such as smoking or alcohol intake should also be disclosed along with past medical history and family history.

  2. Policy lapse - If the claim is filed after the policy's lapse, the claim will be rejected. For the claim to be approved, the premiums need to be paid on time, and if it is not paid on time, it should be paid within the grace period so that the policy is still in force. If the policy is not in force, then the claim will not be accepted.

  3. Delay in filing the claim - If the policyholder cannot fill the claim during the stipulated period of time, that might lead to the claim being rejected. Such cases often lead to investigations that the company conducts.

  4. Missing or incorrect information - One must be careful to provide all the required details, and one must also see that all the details are correctly filled out so that there are no mistakes. Forms must be reviewed carefully so no errors occur.


Insurance is the single most important investment for everyone. It’s not an option anymore; it’s become a necessity. And the pandemic has clearly established this point. Hence, it goes without saying that insurance must form a part of everyone’s portfolio, especially those with dependents on them.

The next question would be how to select an insurance policy. Among other factors, the Claim Settlement Ratio must be considered during this procedure. Because you stand to be in no way insured if your insurance company doesn’t step up to help you when you need it the most. So, take this into account while buying an insurance product.

Stay safe & get insured.

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Vanshika Bagaria

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Vanshika born and brought up in Kolkata, She has done her Graduation from St. Xavier's College, Kolkata with a B.Com (Honours) Degree and will also be joining Narsee Monjee Institue, Mumbai as an MBA student this year. 

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