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Before you buy insurance, these are the numbers that really matter
Buying an insurance policy is more than reading through premiums and coverages—it's leaving your financial security in the hands of an insurer. Behind every glossy brochure lies a set of key statistics that indicate to you how strong an insurance company really is. Insurance ratios are used by commentators and regulators alike to assess the ability of an insurer to settle claims, retain customers, and operate profitably. Understanding them will help you make smarter, safer choices when buying insurance.
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Numbers that never lie
When. you buy an insurance policy—such as life, health, or general insurance.—most look at premium costs and cover sums. Beyond the brochure. though, are. some. significant. numbers that reflect. the. integrity. of. the. insurer. and. its. service. standards. and. ability. to. pay. claims. out. They are. called. insurance. performance. ratios. They can. help. you. make. an. informed. choice. about. a. good. insurer. to. buy. from. and. avoid. future. regrets. Here. are. six. key. ratios. to. look. at. before. buying. any. insurance. policy.
When. you buy an insurance policy—such as life, health, or general insurance.—most look at premium costs and cover sums. Beyond the brochure. though, are. some. significant. numbers that reflect. the. integrity. of. the. insurer. and. its. service. standards. and. ability. to. pay. claims. out. They are. called. insurance. performance. ratios. They can. help. you. make. an. informed. choice. about. a. good. insurer. to. buy. from. and. avoid. future. regrets. Here. are. six. key. ratios. to. look. at. before. buying. any. insurance. policy.
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1. Claim settlement ratio
The claim settlement ratio (CSR) shows the percentage of claims an insurer settled out of total claims received during the last year. A high CSR—most often more than 95%—is desirable. For example, if an insurer has a CSR of 98%, it settles 98 claims for each 100 claims. It's a good measure of the insurer's credibility and is something that should be among the first numbers you check before signing up for a life or health policy.
The claim settlement ratio (CSR) shows the percentage of claims an insurer settled out of total claims received during the last year. A high CSR—most often more than 95%—is desirable. For example, if an insurer has a CSR of 98%, it settles 98 claims for each 100 claims. It's a good measure of the insurer's credibility and is something that should be among the first numbers you check before signing up for a life or health policy.
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2. Incurred claim ratio
This rate is used for health and general insurance. It measures how much the insurer has paid in claims versus how much it has received in premiums in one year. Between 70% and 90%, the insurer is paying claims but staying fiscally fit. Too high and unsustainable losses may be being incurred. Too low, and the insurer will be too frequently denying claims. It's a tightrope that is worth walking.
This rate is used for health and general insurance. It measures how much the insurer has paid in claims versus how much it has received in premiums in one year. Between 70% and 90%, the insurer is paying claims but staying fiscally fit. Too high and unsustainable losses may be being incurred. Too low, and the insurer will be too frequently denying claims. It's a tightrope that is worth walking.
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3. Solvency ratio
The solvency ratio indicates the strength and ability of an insurer to pay claims, especially in the wake of a massive disaster. Indian insurers are mandated by IRDAI norms to maintain a minimum solvency ratio of 1.5. A higher than this ratio indicates that the company possesses adequate financial buffer to pay obligations even during tough times. This is specifically important while buying long-term life or health insurance policies, which may last for decades.
The solvency ratio indicates the strength and ability of an insurer to pay claims, especially in the wake of a massive disaster. Indian insurers are mandated by IRDAI norms to maintain a minimum solvency ratio of 1.5. A higher than this ratio indicates that the company possesses adequate financial buffer to pay obligations even during tough times. This is specifically important while buying long-term life or health insurance policies, which may last for decades.
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4. Persistency ratio
Persistency ratio is a measure of customer satisfaction. It measures the percentage of policyholders who renew policies annually. Measured in time periods (13th, 25th, 37th, etc. month), a high persistency ratio proves that customers trust the insurer's product and service. For example, if an insurer maintains a persistency ratio of 80% by the 13th month, it means 80% of policyholders renewed after the initial year—a positive sign of service quality.
Persistency ratio is a measure of customer satisfaction. It measures the percentage of policyholders who renew policies annually. Measured in time periods (13th, 25th, 37th, etc. month), a high persistency ratio proves that customers trust the insurer's product and service. For example, if an insurer maintains a persistency ratio of 80% by the 13th month, it means 80% of policyholders renewed after the initial year—a positive sign of service quality.
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5. Expense ratio
The expense ratio tells you about how much of the total premiums it collects, the insurer spends on operational costs—like agent commissions and advertising. A high expense ratio can mean higher premiums for you, or lower value delivered per rupee. Insurers with lower expense ratios are more efficient, and this efficiency can trickle down in the form of better pricing or benefits to customers.
The expense ratio tells you about how much of the total premiums it collects, the insurer spends on operational costs—like agent commissions and advertising. A high expense ratio can mean higher premiums for you, or lower value delivered per rupee. Insurers with lower expense ratios are more efficient, and this efficiency can trickle down in the form of better pricing or benefits to customers.
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6. Grievance ratio
This ratio shows the number of complaints registered for every 10,000 policies sold. Lower grievance ratio means lower customer complaint and higher standards of quality service. Checking this will save you from being insured by firms with a poor reputation for delay, miscommunication, or unwarrantedly rejecting claims. IRDAI publishes grievance figures annually, and it's better to look up before finalizing your policy—especially while choosing between very similar insurance products.
This ratio shows the number of complaints registered for every 10,000 policies sold. Lower grievance ratio means lower customer complaint and higher standards of quality service. Checking this will save you from being insured by firms with a poor reputation for delay, miscommunication, or unwarrantedly rejecting claims. IRDAI publishes grievance figures annually, and it's better to look up before finalizing your policy—especially while choosing between very similar insurance products.
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6. Grievance ratio
This ratio shows the number of complaints registered for every 10,000 policies sold. Lower grievance ratio means lower customer complaint and higher standards of quality service. Checking this will save you from being insured by firms with a poor reputation for delay, miscommunication, or unwarrantedly rejecting claims. IRDAI publishes grievance figures annually, and it's better to look up before finalizing your policy—especially while choosing between very similar insurance products.
This ratio shows the number of complaints registered for every 10,000 policies sold. Lower grievance ratio means lower customer complaint and higher standards of quality service. Checking this will save you from being insured by firms with a poor reputation for delay, miscommunication, or unwarrantedly rejecting claims. IRDAI publishes grievance figures annually, and it's better to look up before finalizing your policy—especially while choosing between very similar insurance products.
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Ratios tell you more than brochures
Insurance is a long-term investment in financial terms, and investing blindly in a policy by just checking the premiums can be disappointing. These six ratios—claim settlement, incurred claims, solvency, persistency, expense, and grievance—are an even closer inspection of the insurer's track record in performance and customer service. Revisiting them before buying ensures that your policy not only insures you on paper, but pays out when you need it most.
Insurance is a long-term investment in financial terms, and investing blindly in a policy by just checking the premiums can be disappointing. These six ratios—claim settlement, incurred claims, solvency, persistency, expense, and grievance—are an even closer inspection of the insurer's track record in performance and customer service. Revisiting them before buying ensures that your policy not only insures you on paper, but pays out when you need it most.
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