Law

Understanding Motor Claim Settlement Ratio

Motor claim settlement ratio is a crucial yardstick that can help you zero in on the right vehicle insurance. Check out this post to learn everything about the claim settlement ratio.

The vehicle insurance sector in India has many players enabling potential vehicle insurance buyers to have numerous choices. However, buyers can often feel overwhelmed in choosing the right motor insurance from the number of choices they have.

Therefore, it’s vital to know some crucial standards you can use to measure the performance of a general insurance firm. One such vital standard is the claim settlement ratio. It helps you gauge the insurer’s chances of reimbursing a vehicle insurance claim.

What Is the Motor Claim Settlement Ratio?

The claim settlement ratio is an important parameter in the insurance sector to determine an insurer’s trustworthiness in settling the claim. So, a motor insurance claim settlement ratio can help you identify the insurance provider who is likely to pay for the damages if your insured vehicle is involved in an accident.

How to Calculate Vehicle Insurance Claim Ratio?

The formula to calculate the settlement of motor insurance claim ratio is as follows.

The following example can help you understand the formula better.

Consider a general insurance firm that received 1,00,000 motor insurance claims in 2021. The insurance company settled 92,000 claims out of those 1,00,000 applications that year. Now, let’s apply the formula mentioned above.

Motor Claim Settlement Ratio=  x 100 = 92

Therefore, the motor insurance claim ratio (settlement) of the firm in 2021 was 92%

Limitations of Claim Settlement Ratio

The above section can give you the impression that the higher the claim settlement ratio, the higher your chances of getting reimbursed, which is true to some extent. However, don’t rely solely on the claim settlement ratio, as it has certain drawbacks.

  • It Doesn’t Consider the Size of the Insurer’s Operation

The claim settlement ratio doesn’t consider the number of active insurance buyers of a firm. Consequently, a small firm can score big on the claim settlement ratio than a larger firm.

For example, consider two insurance firms, A and B. Firm A settles 4900 of the 5000 claims received in a year. Firm B settles 9,000 out of 10,000 claims in a year. Now, firm A will have a claim settlement ratio of 98%. But, firm B will have a settlement ratio of 90%, despite settling more claims than firm B.

  • It Doesn’t Consider the Settlement Amount

Even if an insurer pays a lesser amount as compensation toward claim settlement, it’s counted as a settled claim. So, you can’t fully rely on the claim settlement ratio to know the integrity of the insurer.

The bottom line is claim settlement is an important parameter to judge an insurance provider’s track record of settling claims. However, you should also consider the insurer’s reputation, size of operation, etc., to have a clearer picture. Moreover, consider additional factors like ease of purchasing motor insurance online or how easily you can file a claim.

To wrap it up, use the claim settlement ratio as one of the many tools to research a vehicle insurance plan and make the final purchase without any doubt lingering on your mind.

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