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:

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

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%

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

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