Read about the what is claim settlement ratio, how it is calculated & what its types are. Check out Zurich Kotak General Insurance's car insurance policy for more information.
Understanding car insurance claim settlement ratio: What every policyholder must know
Car insurance is mandatory for every vehicle owner in India under the Motor Vehicles Act, 1988. While the minimum legal requirement is a third-party liability insurance, many drivers choose comprehensive cover for wider protection against accidents, theft, fire and natural calamities.
However, buying a policy is not just about comparing premiums. It is equally important to understand how smoothly your claim will be handled when you need support. This is where the car insurance claim settlement ratio becomes important. It shows how consistently an insurer settles claims.
Before exploring this in detail, it also helps to understand the key factors that influence your car insurance premium.
What is the claim settlement ratio (CSR) in car insurance and why does it matter?
The claim settlement ratio for car insurance is the percentage of claims an insurer settles out of the total claims it receives during a financial year. It shows how consistently an insurer pays valid claims raised by policyholders.
Formula:
CSR = (Number of claims settled / Number of claims received) x 100%
Example: If an insurer receives ₹10,000 car insurance claims in a year and settles ₹8,200 of those claims, the CSR will be (₹8,200 / ₹10,000) x 100 = 82%.
The IRDAI claim settlement ratio is published annually by the Insurance Regulatory and Development Authority of India (IRDAI), the regulator of the insurance sector. Reviewing the IRDAI claim settlement ratio helps consumers compare insurers based on their claim performance.
Insurers submit their annual claims data to IRDAI. Only claims that are approved and paid are counted as settled. Rejected and pending claims are not included in the final ratio.
Understanding the key factors that affect your car insurance premium calculation
Many people ask how car insurance premium is calculated. The premium is not fixed. It depends on several factors related to the car and policy choices. Here are the key factors that insurers consider:
Factor | Description | Impact on premium
|
Insured Declared Value (IDV) | IDV is the market value of your car at the start of the policy year. | Higher IDV results in a higher premium. IDV reduces premiums over time. |
Vehicle age & depreciation | Older vehicles have a lower IDV because of depreciation, ranging from 5% to 15% per year, depending on the vehicle age. | Older cars usually have lower premiums but may carry a higher risk. |
Engine capacity (CC) | Cars with engine capacity above 1000cc are considered higher risk due to performance and repair costs. | Higher CC leads to a higher premium compared to smaller engines. |
Geographical zone | Premiums vary by city or state based on risk profiles, traffic density, and accident rates. | Metro cities usually have higher premiums, while rural areas tend to have lower premiums. |
No Claim Bonus (NCB) | Discount given for not making claims in previous years, as per IRDAI slabs. | Up to 50% discount on own damage premium for consecutive claim-free years. |
Add-ons | Optional covers include zero depreciation, engine protection, and roadside assistance. | Selected add-ons increase the total premium. |
Goods and Services Tax (GST) | An 18% GST applies on the base premium and add-ons. | Increases the total premium payable. |
Types of claim settlement in car insurance
When it comes to car insurance, the way your claim is settled can affect convenience and how you manage expenses. Understanding the types of claim settlements helps you make the process smoother and less stressful.
Cashless claims
● Available only at garages that are part of the insurer’s network.
● The insurer directly settles the repair bills with the garage once the claim is approved.
● Policyholder pays any applicable deductibles and costs for items not covered under your policy.
Reimbursement claims
● Policyholders can repair the car at any garage of their choice and pay for the expenses upfront.
● All the relevant documents and bills are submitted to the insurer for approval.
● The insurer reimburses the eligible claim amount after deducting any applicable deductibles.
Documents required for a car insurance claim
To raise a car insurance claim efficiently, you will usually need the following documents:
● Claim form: Properly filled and signed.
● Insurance policy: A copy of your active policy document or cover note.
● Registration Certificate (RC): Copy of the vehicle’s registration papers.
● Driving license: Copy of the license for the person driving during the incident.
● FIR (Police Report): Required for theft, third-party damage, or major accidents.
● Repair estimates & bills: Original invoices for reimbursement or estimates for cashless claims.
● KYC documents: PAN card, Aadhaar, or other valid ID proof.
● Photos/Videos: Evidence of damage from the accident scene.
How to claim car insurance after an accident?
An accident can be stressful, but following a clear process makes claiming your car insurance much easier. Here is how to claim the insurance:
Prioritise safety: Ensure everyone is safe. Check for injuries and move to a safe spot. Call emergency services if needed.
Document the scene: Take photos of the damage, number plates, and the surrounding area. This helps with the claim process.
Exchange information: Collect the other driver’s name, contact details, insurance information, and any witness statements.
File a police report: An official report is often required for significant claims. Keep a copy for your records.
Notify your insurer: Report the incident through your insurer’s app or hotline immediately to start your claim.
Assess & repair: An insurance adjuster will evaluate the damage. After approval, you can take your car to an authorised repair shop.
Why is the claim settlement ratio important for car insurance?
The car insurance claim settlement ratio in India is a key measure of an insurer’s reliability. It shows the percentage of claims an insurance company approves and pays out compared to the total claims it receives.
● Trustworthiness: A high ratio indicates the insurer is dependable and honours its promises.
● Financial security: It ensures that in the event of an accident, you won’t be left paying for expensive repairs out of pocket.
● Peace of mind: You can drive with confidence, knowing your claims are unlikely to be rejected for any valid reason.
● Service efficiency: Companies with strong ratios often offer faster, hassle-free claim processes.
Factors affecting the claim settlement ratio
The Claim Settlement Ratio (CSR) indicates the percentage of claims an insurer settles against those received. A high CSR, typically above 95%, indicates a trustworthy insurer and reliable claim support.
● Disclosure of information: Non-disclosure of pre-existing illnesses or lifestyle habits like smoking can lead to claim rejection. Full transparency ensures smoother processing.
● Policyholder compliance: Submitting correct documents and keeping nominee details up to date helps avoid delays.
● Claim verification: Insurers with thorough underwriting processes at the start often face fewer surprises, resulting in higher settlement rates.
● Operational efficiency: A quick and well-equipped claims team, supported by digital tools like AI for fraud detection, improves the final ratio.
● Policy type: Simple term plans generally have higher CSRs, while complex health plans with multiple exclusions may see lower ratios.
Conclusion
The Claim Settlement Ratio is an important measure of an insurer’s reliability, particularly when choosing car insurance. Reviewing CSR data from IRDAI before purchasing a policy gives valuable insights into how likely your claim is to be settled. Understanding how premiums are calculated, including factors like IDV, depreciation, engine capacity, NCB, and GEO zone, helps assess the true cost of your coverage.
Choosing between cashless and reimbursement claim options depends on convenience and garage availability. Remember, while a high CSR suggests dependable service, it does not guarantee approval, as claims remain subject to underwriting and regulatory guidelines. Being aware of policy terms and exclusions ensures realistic expectations and a smoother claims experience.
FAQs
1. What is the car insurance claim settlement ratio?
It is the percentage of claims settled by an insurer out of total claims received in a year, indicating claims processing efficiency.
2. How can I check the IRDAI claim settlement ratio of an insurer?
The Insurance Regulatory and Development Authority of India (IRDAI) publishes official claim settlement ratio data annually on its website under public disclosures.
3. How is IDV calculated, and how does it affect the premium?
IDV (Insured Declared Value) is the car’s market value, depreciated annually as per IRDAI schedules. Higher IDV leads to higher premiums.
4. What is the difference between cashless and reimbursement car insurance claims?
Cashless claims are settled directly by the insurer at network garages; reimbursement claims require upfront payment and later reimbursement.
5. Does a high claim settlement ratio guarantee my claim will be approved?
Approval depends on the policy terms, the validity of the claim, and proper documentation. A high settlement ratio indicates efficiency, but does not automatically ensure approval.
6. Which factors affect car insurance premium calculation?
Premiums are influenced by the car’s IDV, age, engine capacity, location, No Claim Bonus (NCB), selected add-ons, and applicable GST.
7. Is the third-party car insurance premium calculated differently?
Third-party premiums follow IRDAI’s regulated tariffs, set under the Motor Vehicles Act, and vary depending on vehicle type and the state of registration.
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