Why a 99% term insurance claim ratio may not tell the whole story

The headline claim settlement ratio can obscure claim values, repudiations and delays. Here is how buyers should assess an insurer’s record before choosing term cover.

A term insurance claim settlement ratio can look like a simple seal of approval. In practice, it is only one part of the picture. Insurers often promote figures in the high 90s, which may reassure buyers at first glance, but the number does not show how large the claims were, why some were refused, or how long policyholders waited for a decision. As a result, the ratio is useful, but only if it is read with care.

According to the Insurance Regulatory and Development Authority of India, the claim settlement ratio measures the share of death claims an insurer pays out of the total it receives in a year. The regulator publishes the figure in two forms: one based on the number of claims and another based on the value of those claims. The distinction matters. Industry data for 2024-25 shows that life insurers paid almost all individual death claims by number, but a smaller share by value, which suggests that larger claims were more likely to face scrutiny than smaller ones.

That gap helps explain why the amount-based ratio can be more revealing for term cover. A policy with a large sum assured, especially one bought recently, may be examined more closely than an ordinary claim. The regulator’s numbers also separate repudiated claims from rejected ones. A repudiated claim is one that the insurer denies because it believes the policyholder failed to disclose or misstated something material on the proposal form, such as a medical condition or tobacco use. A rejected claim, by contrast, usually falls outside the policy terms, for example because premiums were not paid and the cover lapsed, or because the cause of death was excluded.

Insurance specialists say buyers should not rely on a single year’s figure when comparing insurers. A smaller company can see its ratio swing noticeably on only a few claims, while a large insurer’s record is steadier and therefore more meaningful over time. Looking at three years of data gives a better sense of whether an insurer consistently pays claims well rather than simply benefiting from a favourable year. It is also worth checking how the company calculates the number on its own website, because some firms present different definitions, or mix together individual and group policies in ways that make direct comparisons less useful.

Even a strong claim settlement ratio does not guarantee that a family will receive payment. Under Indian insurance law, the insurer may question a policy within three years if it believes there was a material non-disclosure or misstatement, and policyholders therefore need to answer every proposal question honestly. That includes existing illnesses, tobacco use, family medical history and other policies already in force. Advisers also stress practical steps that can prevent trouble later: keep nominee details current, tell the nominee where the documents are stored and arrange premiums so the policy does not quietly lapse.

Delays can matter almost as much as refusals. IRDAI’s policyholder-protection rules set deadlines for claims handling, including 15 days for a death claim that does not need investigation and 45 days where an investigation is required. If payment is delayed, the insurer may have to pay interest, subject to the regulatory framework. Families that face rejection or prolonged delay are generally advised to take the matter first to the insurer’s grievance officer, then to IRDAI’s Bima Bharosa portal, and, if needed, to the Insurance Ombudsman. In the end, the claim settlement ratio should be treated as a screening tool, not a verdict. The better test is whether the insurer combines a strong record with transparent underwriting, clear policy terms and a claims process that works when it matters most.