Term Insurance Claim Settlement Ratio: What the Number Tells, and What It Hides

It is common for insurers to advertise their claim settlement ratio on their website. In many cases, the figure falls between 97 and 99%, which may sound reassuring. However, a high claim settlement ratio (CSR) does not tell the whole story.  This blog explains how to interpret an insurer’s figures, what a high settlement ratio may not reveal, and which other factors you should consider when choosing a term insurance plan.

What Does A Term Insurance Claim Settlement Ratio Tell Us?

A term insurance claim settlement ratio is the percentage of death claims an insurer settles out of the total claims it receives during a year. The IRDAI publishes figures for life insurers in its annual report and in its yearly insurance statistics handbook. It is available in two versions. The ratio by number counts. The ratio by amount counts the money involved. Most advertisements quote the ratio by number.

The IRDAI’s annual report for 2024-25 shows what the entire life insurance industry claimed for individual death:

Outcome By number of claims By amount Paid 97.82% 96.29% Repudiated 1.01% 2.74% Rejected 0.66% 0.05% Pending at year-end 0.48% 0.81% Unclaimed 0.02% 0.11%

So, it’s clear that 1.01% of claims were found to be false, but these amounted to 2.74% of the money. Thus, the denied claims were substantially larger than the average claim.

Why Is the Amount Figure More Important For Term Cover?

The same table from above makes the point in rupees. The average claim settled for an individual’s death across the industry in 2024-25 was about ₹3.4 lakh. The average repudiated claim was about ₹9.1 lakh, or roughly 2.7 times the average settled claim.

That accounts for the gap. Insurers tend to look very closely at claims like this: a high sum assured on a policy taken out relatively recently. This means for you, the ratio by number may look great, but large claims do worse.  If you are buying a 1 crore term insurance or more, the ratio by amount can offer an additional perspective on an insurer’s claim settlement record. Remember, “rejected” and “repudiated” are not the same thing, and IRDAI reports them separately.

A repudiated claim is one that is rejected under section 45 of the Insurance Act for misstatement or non-disclosure on the proposal form. For example, hiding a medical condition or tobacco use.

On the other hand, a rejected claim is one that is outside the terms of the policy, e.g., death after the policy has lapsed for non-payment or a cause that the policy excludes. Both types of claims reduce the ratio, but they provide different insights. The repudiations show how the insurer views disputes over disclosure. Often rejections are tied to something a policyholder could have prevented, such as letting premiums lapse.

Decoding the numbers of the insurer

Look at three years of data rather than relying on a single year. A small insurer, settling only a few hundred claims a year, can gain or lose two points on a handful of decisions. The same handful barely moves the ratio at an insurer settling tens of thousands. More than one strong year, a high ratio year after year, tells you something.

Then check what the insurance company counts. Many insurers explain on their own websites how they calculate their term insurance claim settlement ratio, and the method may be different from the IRDAI’s table. This figure is inflated by some excluded claims still pending at year-end. Others report individual and group claims in separate ways. Also, compare the insurer’s own number with the IRDAI number for the same year. And be certain you are comparing individual death claims with individual death claims. Finally, look at the pending share. A high ratio and a large backlog of unresolved claims may simply mean that the insurer hasn’t decided on its difficult cases yet.

What The Claim Settlement Ratio Does Not Tell You?

A 99% CSR describes the claims of thousands of other families. Section 45 allows an insurer to challenge the policy for misstatement within three years of the policy coming into force. The law restricts the insurer from contesting the policy on any grounds after 3 years, but the claim must still be covered.The best way to ensure your claim is protected is to answer every question on the proposal form truthfully. This includes tobacco use, existing illnesses, family medical history, and other life policies you hold. A marginally higher premium for a declared condition is much cheaper than a repudiated claim.

Pro Tip: Tell your nominee about the policy and where the documents are located. Keep the nominee details updated after a marriage or birth. Pay your premiums on time, or arrange auto-debit so the policy never lapses silently.

What happens if a claim is delayed or denied

IRDAI’s 2024 master circular on the protection of policyholders’ interests sets out timelines that life insurers must follow when handling claims:

Situation Deadline Death claim that needs no investigation 15 days from claim intimation Death claim that needs investigation 45 days, including the investigation Response to a complaint 14 days

If a death claim is paid late, the insurer may be required to pay interest for the delay at the applicable bank rate + 2%, subject to the relevant regulatory provisions. In case of rejection or delay in claims, the family should first write to the insurer’s grievance officer and then escalate through the Bima Bharosa portal of IRDAI. If the matter is still not settled after 30 days, they can approach the Insurance Ombudsman, who charges nothing to hear a complaint.

Make good use of the CSR

Think of the claim settlement ratio as a filter, not as a final verdict. Use the ratio by amount, over three years, to weed out insurers whose big claims get into trouble. Then compare the remaining insurers based on cover, term, and premium. Ultimately, a claim’s outcome depends on several factors, including the policy terms, information disclosed when the policy was purchased, and whether the claim meets the policy requirements; not just the insurer’s headline ratio.