Ratios

Claim Settlement Ratio gives us an idea about the claim solving ability of the insurance company. If claims are intimated and the insurance company solves those, claim settlement ratio would be good. In simple words - claim settlement ratio is the number of claims settled by the insurance company out of every 100 claims it has received.

Higher claim settlement ratio implies that majority of claims are getting solved. Higher is the claim settlement ratio for the company, the better the company.

A repudiation ratio is a measure of claims rejected by the insurance company. Claim repudiation ratio gives us an idea about the percentage of the claims rejected by the insurer to total claims made. In simple words - Claim repudiation ratio is the number of claims rejected by the insurance company out of every 100 claims it has received.

The lower this ratio, the higher the settlement of claims. So lower the CRR, better for proposer. But sometimes it won’t give clear idea because the reasons for rejection could be false claims, untimely intimation, coverage not covered under the policy etc.

 FY 2010-11
     Life Insurers Claim Ratios for FY 2010-11



• How do claims ratios help me?

The point of these claim ratios is to make you aware about the claim handling by the insurer. In case of unfortunate demise, your loved ones should not face problems of getting the claim amount. The claim ratios assist you in making comparison of life insurance companies. However new insurance companies typically have low settlement ratio but it does not depict the real picture. If claims are being made so early in the term, there’s possibility of fraudulent cases. Also new insurer might have 20 claims compared to veteran insurer with 2000 cases which tips the ratio in latter’s favour.



• Should I follow claim ratio in making decision?

Claim ratios are just mathematical tool in making the analysis. They might not reflect the true scenario. Example- An insurer gets 10 claims out of which just 3 genuine claims are settled. Claim settlement ratio would just be 42% which would be unfair to insurer as 7 cases turned out to be fraud. It is important to keep holistic view while making the decision, consider ratios but also products benefits, quotes etc too. Moreover, while buying an insurance cover you should also need to focus on the insurance companies claim settlement ratio, profitability of the insurance company, premiums charged, While buying an insurance policy you should incorporate some financial planning aspects such as your age, number of dependents in the family, your income income, expenses etc. which will help you to assess your Human Life Value (HLV), and lead you to buy the right insurance cover



• 2. Solvency Ratio
• What is Solvency Ratio?

The solvency of an insurance company corresponds to its ability to pay claims. The Solvency ratio is a way investors can measure the company’s ability to meet its long term obligations.



• What we need to check in solvency ratio?

The higher the ratio is the better equipped a company is to pay off its debts and survive in the long term. In general a ratio of 20% or higher is considered to be a good ratio where as a ratio of 20% or lower is considered to be a bad ratio. As most ratios should be compared with other companies in the same industry group.




 FY 2005-06
     Life Insurers Solvency Ratios for FY 2005-06

 FY 2006-07
     Life Insurers Solvency Ratios for FY 2006-07

 FY 2007-08
     Life Insurers Solvency Ratios for FY 2007-08

 FY 2008-09
     Life Insurers Solvency Ratios for FY 2008-09

 FY 2009-10
     Life Insurers Solvency Ratios for FY 2009-10

 FY 2010-11
     Life Insurers Solvency Ratios for FY 2010-11



• What is the minimum Solvency Ratio requirement?

1- Life Insurers - the Required Solvency Margin is the higher of an amount of Rs.50 crore (Rs.100 crore in the case of Re-insurers) or a sum which is based on a formula given in the Act / Regulation.

2- General Insurers - the Required Solvency Margin shall be the maximum of the following amounts -

(a) Fifty crore of rupees (one hundred crore of rupees in the case of Re-insurer) ; or

(b) A sum equivalent to twenty per cent of net premium income; or

(c) A sum equivalent to thirty per cent of net incurred claims, subject to credit for re-insurance in computing net premiums and net incurred claims being actual but a percentage, determined by the regulations, not exceeding fifty per cent.



• If the insurer miss the above solvency margin?

The insurance companies may have to inject additional capital to maintain the regulatory requirements if they won’t maintain solvency margins.