When you’re shopping for term insurance, the Claim Settlement Ratio (CSR) is often the first metric insurance companies highlight. It’s an easy-to-understand percentage that tells you how many claims (by number) an insurer settled out of the total claims they received.
However, for those purchasing a high-value term insurance policy—a cover of a crore or more—relying solely on this number can be misleading. A more crucial, yet often overlooked, metric is the Amount Settled Ratio. Understanding the difference between these two ratios is essential for ensuring your high-value policy truly protects your family.
The Pitfall of the “Number of Claims Settled”
The standard claim settlement ratio (CSR) is calculated by the number of policies settled. Here’s why this can create a false sense of security for high-value clients:
Imagine an insurer receives 1,000 claims in a year.
- 950 claims are for low-value policies (e.g., ₹10 lakh).
- 50 claims are for high-value policies (e.g., ₹2 crore).
If the insurer settles all 950 low-value claims but rejects just five of the high-value claims, their standard CSR will still be excellent: $(950 + 45) / 1000 = 99.5\%$.
This number looks fantastic, but if you purchased one of those high-value policies, the five rejected claims represent a massive loss of capital for five families. The standard claim settlement ratio masks potential hesitancy the insurer might have when facing substantial payouts. For high-value term insurance, insurers often conduct much deeper scrutiny, and a seemingly high CSR by number doesn’t guarantee your crore-plus claim will sail through.
The Power of the Amount Settled Ratio
The Amount Settled Ratio tells a truer story for high-net-worth individuals. This ratio is calculated based on the total monetary value of the claims settled versus the total value of claims received.
Using the previous example:
Suppose the total value of all claims received was ₹500 crore. If the insurer only paid out ₹480 crore (rejecting several large claims), the Amount Settled Ratio would be $480 / 500 = 96\%$.
This $96\%$ ratio is much more revealing than the $99.5\%$ by number. It indicates that the company is more conservative when dealing with large, seven- or eight-figure payouts.
For a family relying on a high-value term insurance payout to replace decades of income, cover substantial debts, or fund children’s futures, this metric provides the clearest indication of the insurer’s willingness and ability to honor large commitments.
Making the Smart Choice for High-Value Term Insurance
When you are assessing insurers for a significant term insurance policy, always look for companies with a high claim settlement ratio by both number and amount.
A good insurer for high-value policies should consistently demonstrate a commitment to paying out large sums. This transparency ensures that the substantial premium you pay for your peace of mind will translate into the intended financial security for your family. Ultimately, for those purchasing high-value term insurance, the amount settled ratio is the most reliable measure of an insurer’s integrity and financial reliability.
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