Claim settlement ratio

What is the claim settlement ratio?

The claim settlement ratio (CSR) is the percentage of claims an insurer actually paid out of all the claims it had in hand during a financial year. In India the term is used mostly for life insurance, where it measures individual death claims: how many were paid, and how many were repudiated, rejected, left unclaimed or still pending at year end. A high ratio says the insurer pays most of the claims it receives. It does not say anything about how fast it pays, or whether any one claim will be paid.

How the claim settlement ratio is calculated

The standard working uses the figures life insurers report to IRDAI in their regulatory returns:

Claim settlement ratio = claims paid during the year ÷ (claims pending at the start of the year + claims intimated during the year)

The same formula can be run on the number of claims or on the rupee amount. The two answers usually differ, because large claims are more often investigated and more often disputed, so the ratio by amount tends to sit below the ratio by number.

IRDAI publishes the industry and insurer-wise tables in its annual Handbook on Indian Insurance Statistics. The 2024-25 edition gives these figures for individual death claims:

For the industry, 10,34,455 claims were up for decision during the year (opening pending plus fresh intimations). Insurers paid 10,11,880 of them, repudiated or rejected 17,333, and carried 4,999 forward as pending. These are our calculations from IRDAI's Table 14 and Table 15.

The handbook also shows a duration-wise table (Table 18) that splits settled claims into those paid within 30 days, 31 to 90 days, and so on. That table is often more useful than the headline ratio, because the IRDAI Master Circular on Protection of Policyholders' Interests, 2024 requires a death claim to be settled within 15 days of intimation where no investigation is needed, and within 45 days where it is.

In general and health insurance, the headline measure is usually the incurred claims ratio, which compares claims cost with earned premium. That is a profitability measure, not a settlement measure. See loss ratio.

What the claim settlement ratio means for distribution

CSR is one of the most quoted numbers in a life insurance sale, and one of the most misused. A few practical points for sales managers and advisers:

• Explain what it is not. A 99% ratio is not a promise. Each claim is judged on the policy terms, on the proposal form and, within the first three years, on Section 45. A good adviser says this plainly when quoting the number.
• Show both ratios. If a pitch deck shows only the ratio by number, ask for the ratio by amount too. A wide gap between them can point to a pattern of disputes on high sum assured cases.
• Watch small denominators. An insurer that handled a few hundred claims can swing several points in a year on a handful of decisions. Three-year averages are a fairer comparison than one year.
• The proposal form drives the ratio. Most repudiations in the early years trace back to non-disclosure of health, habits, income or other policies. Under Section 45, the person who solicits and negotiates a policy is treated as the insurer's agent for forming the contract, so a filled-in-by-the-agent proposal with gaps is a sales quality issue, not just a customer issue.
• Claims support is part of the job. The 2024 master circular requires that a claim intimation received by a distribution channel be passed to the insurer immediately. Channels that help families file complete claims quickly improve both the customer outcome and the insurer's turnaround numbers.
• Use CSR alongside complaint data. IRDAI's handbook also reports grievances by insurer. A strong CSR with a high complaint count on claims is worth a closer look before a partner is shortlisted for a bancassurance or broking shelf.

Common mistakes with the claim settlement ratio

• Comparing a life insurer's CSR with a health insurer's incurred claims ratio, which measures something different.
• Quoting an old year's ratio without the year. Always date the figure.
• Treating "pending at year end" as rejected. Pending claims are undecided, and IRDAI reports them separately.
• Ignoring group claims. The handbook reports group death claims in separate tables, and ratios there can differ from individual business.