Claim Settlement Ratio

What Does a Claim Settlement Ratio Tell You?

The Claim Settlement Ratio (CSR) is an essential indicator of an insurance company's reliability and efficiency. It measures the proportion of claims settled by the insurer against the total claims received over a specific period. 

A high CSR indicates that the company is financially stable and committed to honouring its policy agreements. Conversely, a lower CSR may signal potential difficulties in claim processing or financial instability. 

How to Calculate Claim Settlement Ratio of an Insurance Company?

To calculate the Claim Settlement Ratio, divide the number of claims settled by the insurance company during a specific period by the total number of claims received during the same period. Multiply it by 100 to express the result as a percentage.

Example: Let's say an insurance company received 1,000 claims last year and successfully settled 950 of them. The CSR would be —

Total number of claims settled in a year/ Total number of claims in a year) X 100 

This indicates that the company settled 95% of its claims.

What is an Ideal Claim Settlement Ratio?

An ideal Claim Settlement Ratio is above 90%. It shows excellent performance and that the insurer is efficient and reliable in handling claims. A CSR above this threshold suggests that the company has a strong track record of fulfilling its financial commitments to its customers. 

However, while a high CSR is important, it should be viewed along with other factors such as the insurer's service quality, product range, and overall financial health.