Categorized | Life Insurance

Judging a Life Insurance Company Based on its Claim Settlement Ratio

 life insurance companies and their myriad products! How difficult it becomes for laymen to choose the best among the rest! Term insurance plans, endowment plans, child plans, retirement plans and the very popular unit linked plans (ULIPs) – the choices are many and a common man is baffled when it comes to choices. The plan features are a guiding factor and the premiums are the decisive one, yet, the company’s track of Claim settlement, though important too, is usually ignored. Though the plan may be good and the Premium competitive, do you know how to judge the probability of getting your claim settled?

The Insurance Regulatory and Development Authority, also called the IRDA in short, has devised a formula for computing the proportion of claims settled by life insurance companies. This formula is called the Claim Settlement Ratio and depicts the performance of the company in terms of claim settlement. The ratio helps customers to determine whether their claims have a higher probability of getting settled or not. A higher formula is desirable as it reflects a very good claim settlement probability.

What is the formula for the computation of the Claim Settlement Ratio (CSR)?
The Claim Settlement Ratio (CSR) is computed using the following formula:

CSR = (Total claims settled in a year/total claims received in that year)*100

The ratio is expressed as a percentage and computed for each financial year. The number of policies is considered for the above computation. The IRDA publishes the CSR of every life insurance company every year and customers can choose an Insurer based on this ratio.

What is the CSR of the various insurance companies?

As per the last financial year of 2014-15, here is the current CSR of all life insurers:


The table shows that LICI is the leader in settling its claims at 98.19% followed closely by Max Life Insurance Company (96.03%) and Birla Sun Life (95.30%). These companies reflect trustworthiness when it comes to settling of claims made against them. On the other hand, the bottom three insurers with a ratio in the 50% and 60% range are Edelweiss Tokio Life Insurance (57.14%), DFL Pramerica Life Insurance (57.19%) and Shriram Life Insurance with 65.66% settlement ratio. These companies present a dismal state where honoring of claims is concerned.


For us laymen, a higher ratio indicates good news. The higher the ratio the better are your chances of getting your claim settled. Ratios above 90% should be considered when making a choice of an insurance company. A lower ratio puts your claim settlement in jeopardy. As in the above figures, companies demonstrating ratios in the zone of 90% (highlighted in green), besides LIC, are your best bet. Checking a life insurance policy with reference to the issuing company’s CSR is also important as it reflects the chances of your claims being settled. With the current reports presented to you, the choice should not be hard, isn’t it?