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SMC Insurance Brokers Pvt. Ltd.
Parsvnath Metro Mall, Near Pratap Nagar Metro Station, Pratap Nagar, New Delhi-110007
Registration No: 289, Registration Code No: IRDAI/DB-272/04/289, Valid till: 27/01/2026, License category: Direct Broker (Life & General), CIN: U66000DL1995PTC172311
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Should You Choose Your Insurer On The Basis Of The Claim Settlement Ratio?
When buying a health insurance plan, you may have a lingering doubt about whether the insurance company will actually honour your claim settlement request.
One of the most popular metrics promoted by insurance companies to dismay these fears is the claim settlement ratio. You would also have been recommended to check an insurance company’s claim settle ratio before investing your money in a plan.
What is a claim settlement ratio? How does it work? And does it really stand as a true test of an insurance company’s performance and expected service?
Let’s explore
Claim Settlement Ratio
A claim settlement ratio is calculated as the number of claims settled by the insurer divided by the number of claims received in a particular financial year.
Claim Settlement Ratio = Number of claims settled/Number of claims received
For instance, if Insurer A has a claim settlement ratio of 97%, it means the insurer paid 97 out of 100 claims. The remaining three claims were rejected or pending.
Limitations Of The Claim Settlement Ratio
While a claim settlement ratio may seem to be a good filter to judge an insurance company’s service, it doesn’t give you the complete picture. It has its own drawbacks.
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No Segregation Between Valid And Invalid Claims
A claim settlement ratio does not indicate how many valid claims were filed and how many were settled by the insurer.
If an insurer fails to identify invalid claims and settle every claim that comes their way, they may be left with little or no money for genuine claimants. Hence, insurers must be able to distinguish between valid and invalid ones, if they want to remain financially viable in the long run. Sometimes, even good insurers might have a poor claim settlement ratio if they encounter a lot of fraudulent claims in a year.
ExampleIn the following table, we will look at two insurers, their claims received, and their claims settled -
| Insurance company | Total Claims | Valid Claims | Invalid Claims | Valid Claims Settled | Invalid Claims Settled | Total Claims Settled | Claim Settlement Ratio |
|---|---|---|---|---|---|---|---|
| Insurance company A | 100 | 94 | 6 | 94 | 0 | 94 | 94% |
| Insurance company B | 100 | 90 | 10 | 90 | 5 | 95 | 95% |
Here
| Insurance Company A | Insurance Company B |
|---|---|
| The insurer gets 100 claims a year. Out of these, only 94 are valid claims and the remaining 6 are invalid cases. In this case, the insurer settles 94 of the 100 claims resulting in a 94% settlement ratio. | Here, the insurer receives 100 claims in a year. Among these, they detect ten fraudulent claims. However, they still settle 5 fraudulent claims out of 10, and 90 valid claims. Their claim settlement ratio is 95% . |
They both seem to have a good claim settlement ratio! How do you choose between these two options?
Insurance company A
They rejected invalid claims and paid off only valid claims.
Insurance company B
They are definitely not doing the right thing by paying off invalid/fraudulent claims. This clearly indicates that they may not remain financially viable for a long time. As a result, the insurance company may become underfunded by the time your family raises a claim and won't be able to settle it.
This example shows that 'high claim settlement ratios' can be deceptive and don't necessarily reflect the quality of an insurance company.
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No Information About The Claims Experience
A claim settlement ratio does not include any information about the claims experience. There are several aspects that influence the claims experience -
- The average processing time for valid or approved claims. You may have heard of people receiving claim amounts after 1-2 years, or even more. Why is there such a delay? When you file a claim within a few years of policy purchase, the insurers will diligently check whether your claim is genuine and so, this approval process takes time. Such long waiting periods may cause a financial blow to the claimant, especially if their lifestyles are dependent on the amount.
- How smooth the claims process is when it comes to form length, documentation, etc.
- The quality of customer service when you contact the call centre. Are your complaints/queries heard and resolved efficiently and effectively?
- Infrastructure for digital claim filing.
Analysing these factors will help you understand how seamless your claim journey will be. But, the claim settlement ratio doesn't provide answers to any of these questions.
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Does Not Reflect On Denial Of High Value Claims
Say an insurer receives 95 claims of Rs 5 lakhs each in a year, and five claims of Rs 1 crore each.
The insurer settles all smaller claims and pays 95 x 5 lakh = 4.75 crores. However, the five large claims, totaling 5 crores, were rejected.
The Claim Settlement Ratio = 95/100 = 95%
Though the company showcases a whopping 95% claim settlement ratio, it is quite evident that they have settled only the small amount claims and rejected the large ones. Now, imagine one of those 1 crore claims being yours!
Let's take a closer look at how much they've settled out of what was claimed -
Here, the Claim Value Settlement Ratio = 4.75 Crores / (5+4.75 Crores)
= 4.75 Crores/9.75 Crores
= 48.7%
By looking at this number, it is quite evident that the claim settlement ratio alone cannot tell you how much money has been paid out.
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Summing Up!
“All that glitters is not gold” holds true when it comes to the claim settlement ratio. An insurance company with a high claim settlement ratio is not necessarily the ideal one, nor is one with a low claim settlement ratio unreliable. Ensure you choose the right policy based on your needs and not based on the glitzy CSR number flashed on the websites.
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- We pursue your claims till the very end.
- We understand your needs, and advise most suitable insurance products to you.
Our Customers' Stories
Sharing the experience of happy and satisfied customers with you.
Sameer Yadav
I was searching for investment plan but I couldn't find it, then I got the call from SMC insurance and they aligned a call with Ishita Sharma as point of contact (POC) for all my queries and she explain me very well. Ishita explain me all investment plan with advantage and disadvantage, I really appreciate her. Ishita always enthusiast towords work and ready to answer all my questions .I have taken two policies ( HDFC click to invest) plan with 15k premium per month. I always recommend SMC insurance to all, for better life and happy retirement with huge health and wealth. Thank You SMC insurance for your best service. Special thanks to Ishita for E2E help and endless support, you did fabulous work. Show More
Dheeraj Bhatia
I am associated with SMC insurance since 2011 and found them to be most ethical, trustworthy and highly responsive. Some of my precious policies done thru other agencies are still running on SMC’s advice. That is a strong testimony to their customer-centric approach. I am glad to be associated with SMC and strongly recommend their services to all concerned. Wishing the very best to Team SMC !Show More
Jyoti Sharma
We were fortunate enough to have selected SMC as our Health Insurance Broker for they have been very helpful in resolving our queries related to health insurance. I would like to cite two examples where SMC's role has been very crucial. One was when payment for cashless hospitalization was not coming through as the insurance company was taking undue longer time to approve the Hospital Bill. It was then I talked to Neha and it was she who through her contacts in the Insurance co. facilitated and expedited the approval for payment of hospital bill. Second was very recently when the Insurance co. had proposed a top up "Enhancer" policy for our existing policy. When I talked to Neha she immediately told me not to take this policy being offered without any medical test as it will not be beneficial to us and may create problem later on account of recent hospitalization. If I had I not consulted Neha, I would have into a big trouble with the insurance co. These two instances speak very high of sincere advice and timely help rendered by the SMC Staff, Ms. Neha Khanna which helped us a lot in time of need.Show More
Sumit Khanna
Hi, I am Sumit here, purchasing insurance policies from SMC for almost 8 years. Would like to recommend this company to other customers because they are taking care of my insurance broking services in a fabulous way. I would like to extend my gratitude and thanks to policy servicing and also insurance claim backend services. They have rendered fantabulous services for me and would like you guys to definitely go and rely on them for all your insurance needs.Show More
Kishor Kumar Bijlani
My experience with SMC Brokers is excellent. They provide support from the beginning till end i.e from issuance of insurance policies till settlement of claims. They explain very nicely various provisions relating to Insurance Policy also facilitate settlement of claims with Insurance Companies. Show More
Megha Singhal
I have purchased HDFC policy from SMC Insurance with the help of Harsh Sharma. I have got the satisfactory services from SMC Insurance. Thank you SMC Insurance.Show More
