What is Claim Settlement Ratio?

What does Claims mean?
Claims are a formal intimation to the insurance company about the receiving the sum assured as per the policy terms. The insurance company after reviewing the validity of the claims makes the agreed payment to the insured or the nominee.
The claims occur under two circumstances:
1)      Maturity Claim: This type of claim needs settlement once the policy completes the term selected. The policies like the endowment plans, money back plans or child plans fall under this category.

2)      Death Claim: This occurs in case of death of the policyholder during the term of the policy. The death could either be due to illness or accidental.

What Does Claim settlement Ratio Mean?
The claims settlement ratio is the proportion of death claims which have been settled by the insurance company from amongst the total claims received by the insurance company.
Claim Settlement Ratio = Total no. of death claims approved by the insurer  
                                                  Total no. of death claims received by the insurer.

What does Claim settlement Ratio indicate?
This ratio provides a fair idea whether the insurance company can be trusted as a good option for insurance cover especially in case of settlement of death claims since the policyholder would want a reliable insurer in case of death of the policyholder. Buying the insurance policy and premium payment is not the only objective or the end of the insurance process.
Limitations of Claim Settlement Ratio:
1)      Claim settlement Ratio gives the total number of claims settled by an insurer irrespective of the type of insurance policy. So, for an individual who wishes to analyze the ratio for each type of plan this CSR does not help.
2)      The ratio gives percentage of settlement and not actual figures which would generally give a better idea.
3)      The settlement ratio if calculated during the initial years of the product launch in the market would give a poor ratio, since it is the longetivity of the plan in the market which actually decides the CSR better.

Source- policyx/blogs/what-is-claim-settlement-ratio/

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