Kathmandu. Most of us buy life insurance to protect our loved ones financially in case of any unfortunate or unexpected life events that may occur in the future. The insured pays the insurance premium to the insurer regularly for a certain period of time. The purpose of making regular payments is so that in the event of the insured’s unexpected death, other family members dependent on him will receive a payment from the insurer and the rest of his life will be comfortable.
However, if your insurer does not pay the claims made by the insured on time, then life insurance may be useless. How can you find out whether your life insurance company pays the claims made by its insured on time? What percentage of the total claims received by the insurer throughout the year does it pay and how much is delayed?
To understand how effective your life insurance is in paying claims, you can take the help of the claims payment ratio. But in Nepal, there is no other option but to believe the claims made by any life insurer. And most insurers, both life and non-life, do not make the claim payout ratio public. The Nepal Insurance Authority has not yet published such data. Even the insurers themselves do not have the practice of transparently disclosing such data to the public in Nepal.
In neighboring India, the insurance regulator, the Insurance Regulatory and Development Authority, has been publishing such data annually. Insurers are using this published official data as a tool to promote their business and win the trust of the insured.
The claim payout ratio of life insurance companies in India ranges from 95 percent to 100 percent. Among South Asian countries, the claim payout situation is the worst in Bangladesh. There, the insured is receiving claim payments of barely 15 percent of the total claims.
At one time, the Authority, which remained silent while a life insurer was promoting the market by saying that it had the highest bonus rate, issued an order to all insurers not to advertise using the term “highest bonus rate” when other insurers were distributing more bonuses than that insurer. Currently, the Authority also regularly collects data on death claim payment delays from insurers but does not publish it for public information.
The insured has the right to know how quickly and in what quantity and percentage the amount of death claim has been paid by which insurer. This is also an important criterion for making an appropriate decision about whether to insure with a life insurer or not.
What is the claims payout ratio?
The claims payout ratio refers to the fact that how many claims an insurance company pays out of the total claims it receives in a particular period. For example, if an insurer has a 95 percent claims payout ratio for 30 days, this means that the company is likely to pay 95 out of every 100 claims received from insureds within 30 days of receiving the claim.
The claims payout ratio can help measure how easily an insurer will pay out to an insured if they make a claim. From the insured’s perspective, a high claims payout ratio, i.e. close to 100 percent, is considered desirable, as it indicates that the insurer is reliable. And. It proves that it pays almost all the claims received from the insured within a short period of 30 days.
If an insurance company has a low claims payout ratio, it reflects that the company has a tendency to delay or hesitate.
Although the claims payout ratio is an important criterion for checking the reliability of an insurer, it should not be the only factor on which you decide on your life insurance. Before making a final decision, you should also consider other factors such as the risk coverage offered and the premiums to be paid.
