Claim Settlement Ratio, Explained
Claims paid over total claims. Simple to state, easy to misread without the denominator.
The claim settlement ratio is the number every term-plan buyer is told to check: out of all the death claims an insurer dealt with in a year, what share did it pay? A trainee at a life insurer will hear it in every sales meeting, and IC-01 expects you to know how it is built.
It is a useful figure and an easily misread one. Knowing what goes into the denominator matters more than memorising anyone's percentage.
You save ₹300
- Full 100-question mocks
- Principle-by-principle practice
- Section-wise sets
One payment, no subscription
How the Ratio Is Worked Out
IRDAI's annual report lays death claims out in six columns. The ratio is the paid column over the total.
- 1
Total claims for the year
Every death claim the insurer had on its books for the year: the denominator.
- 2
Split the total by outcome
Paid, repudiated, rejected, unclaimed, and pending at the end of the year. The five add back to the total.
- 3
Divide
Claims paid divided by total claims, times 100. By number of policies, this is the familiar claim settlement ratio.
- 4
Repeat by amount
The same division using rupee amounts. A ratio by amount lower than by number means larger claims are being refused or held up more often.
The Industry Figures for 2024-25
Life insurers' death claims, from IRDAI's Annual Report 2024-25 (Table I.11).
Individual policies
Paid, by number
97.82%
Paid, by amount
96.29%
Group business (by lives)
Paid, by number
99.68%
Paid, by amount
97.93%
| Segment | Paid, by number | Paid, by amount |
|---|---|---|
| Individual policies | 97.82% | 96.29% |
| Group business (by lives) | 99.68% | 97.93% |
What Each Outcome Means
- Paid
- Settled during the year.
- Repudiated
- Refused under section 45 of the Insurance Act, typically for fraud or suppression of a material fact within the three-year window.
- Rejected
- Refused because the policy's terms and conditions do not cover the claim, for example death in an excluded circumstance.
- Unclaimed
- Payable, but no claimant has come forward or can be traced.
- Pending
- Still open at the year end, often awaiting documents or investigation.
Quick practice on insurance principles. No signup.
Settlement Ratio vs Incurred Claims Ratio
General and health insurers are usually judged on a different number, the incurred claims ratio (ICR): net incurred claims divided by net earned premium. It measures how much of the premium went on claims, not how many claims were paid. The non-life industry's ICR was 82.88% in 2024-25.
The two answer different questions. A high settlement ratio says the insurer pays most claims. A high ICR says claims are eating most of the premium, which is good value for buyers in the short run but a pricing concern if it stays above 100%.
Where to Find the Figures
IRDAI publishes industry death-claim data, insurer-wise incurred claims ratios and insurer-wise solvency ratios in its annual report each year. For one insurer's settlement ratio, use the claims data that insurer publishes itself, and compare insurers on the same year and the same basis (number or amount).
How IC-01 Tests This
Questions test the vocabulary around the ratio more than the arithmetic: the difference between a rejected and a repudiated claim, what IBNR or a pending claim is, and which ratio applies to which kind of insurer. The trap is mixing the settlement ratio with the incurred claims ratio, or reading a 98% settlement ratio as "98% of money claimed was paid".
FAQs
How is claim settlement ratio calculated?expand_more
Claims paid in the year divided by total claims handled in the year, times 100. IRDAI shows it both by number of claims and by amount.
What is the claim settlement ratio of the life insurance industry?expand_more
For individual death claims in 2024-25, IRDAI's annual report shows 97.82% paid by number and 96.29% by amount.
What is the difference between claim settlement ratio and incurred claims ratio?expand_more
Claim settlement ratio is the share of claims paid. Incurred claims ratio is net incurred claims as a share of net earned premium, and is the usual measure for general and health insurers.
Is a higher claim settlement ratio always better?expand_more
It is a fair first check, but look at the ratio by amount too, the share of claims pending, and more than one year. A small insurer's ratio can swing on a handful of claims.
Next steps
Take a full IC-01 mock testFull-length IC-01 practice, timed and scored.