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What Everyone Ought To Know About Claim settlement of Motor Insurance


Claim settlement is the last step in the claim procedure which is to be performed by the insurance companies. This is the stage where people get frustrated because of the delay in the payment of compensation for the loss. Even if you get the amount of compensation on time, you do not get the entire amount of loss incurred. This is because of the carelessness and ignorance of the policyholder at the time of purchasing the policy. People get attracted to policies which are available at lower rates of premium and tend to purchase them without having knowledge of what it includes and what it excludes. Some of us fail to understand the policy wordings and stay unaware of the hidden clauses like depreciation on nylon, plastic parts, battery and airbags etc. and stay in the assumption that our vehicle is 100% insured.

Claims can be settled in two ways:

  • A Cashless Claim does not involve any physical exchange of cash during claim settlement. The insurance company directly pays the garage (if it is under the insurer’s garage network) for the charges involved in the repair of the vehicle. One has to pay only the voluntary deductible
  • A Non-Cashless / Reimbursement Claim is one where the policyholder has chosen a garage which is not part of the insurer’s listed network of garages. Here, the policyholder will be required to make bear the cost of repairs done to the vehicle, which will be later reimbursed to the policyholder by the insurance provider, on submission of the necessary documents and bills.

There are some things that are not covered by the insurance companies. These things are to be kept in mind while purchasing an insurance policy

  • Voluntary deductible: It is the amount that you will have to pay out of your pocket at the time of settlement of a claim. The insurance companies are liable to pay only the remaining amount of loss.
  • The rate of depreciation for replacement of the parts in case of partial loss of the vehicle:
  • Rate of depreciation for all rubber, nylon/plastic parts, tyres, tubes, batteries and air bags-50%
  • Rate of depreciation for all fibreglass components-30%
  • Rate of depreciation for all parts made of glass-NIL
  • Rate of depreciation for all other parts including wooden parts is to be as per the following schedule-50%


Age of the Vehicle Rate of Depreciation Applicable
Less than 6 months No Depreciation
Above 6 months but less than 1 year 5%
Above 1 year but less than 2 years 10%
Above 2 years but less than 3 years 15%
Above 3 years but less than 4 years 25%
Above 4 years but less than 5 years 35%
Above 5 years but less than 10 year 40%
More than 10 years 50%


  • The rate of depreciation for painting: In case of painting, the depreciation rate of 50% shall be applied only to the material cost of total painting charges, in case of a consolidated bill for payment charges, the material component shall be considered as 25% of total painting charges for purpose of applying the depreciation.

Claim Settlement Ratio

Settlement of a claim is a very time-consuming process. People are not sure as to whether they will get the compensation for their claim or not. And insurers are good at finding ways to reject the claims because of the negligence of the policyholders in understanding the terms of the policy and some are delaying the payment due to unknown reasons even though one has submitted all the documents related to the claim. So it is important that you look at the claim settlement ratios of the companies before purchasing an insurance policy as claim settlement is an important service provided by the insurers.

What is claim settlement ratio?

Claim settlement ratio is the ratio that tells you the number of claims that get approved as compared to the total number of claims received by the company over a period of time.

Claim Settlement Ratio is calculated by dividing the number of claims approved by the insurance company with the total number of claims received.

Claim Settlement Ratio = Number of claims approved / Total number of claims received

Let us understand this with the help of an example:

The ABC Motor insurance company received 100 claims in the year 2016, out of which 90 claims were settled. So now, according to the formula of Claim Settlement Ratio

Number of claims received= 100

Number of claims settled= 90

Therefore, Claim, Settlement Ratio= 90/100

So, the Claim Settlement Ratio for ABC Company will be 90% for the year 2016

  • The higher the claim settlement ratio of a particular company, the greater are the chances of a claim being settled by it.
  • Choosing a policy with a lower claim settlement ratio, even if it has a low premium, may not be wise, as this defeats the purpose of having an insurance cover.

Pragati Rajoria

Pragati Rajoria

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About Me

I’m a Commerce Graduate & CFP Professional, engaged in blogging since 3 years. I’m not affiliated with any financial product. The purpose of writing blog is to spread financial awareness and help people in achieving excellence for money. Please note that the views expressed on this Blog/Comments are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion.

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