Buying Insurance in India? Key Factors to Consider Beyond Claim Settlement Ratio

When it comes to purchasing insurance in India, most people tend to focus primarily on the Claim Settlement Ratio (CSR) — the percentage of claims an insurer pays out. While CSR is certainly an important indicator, relying only on it can be misleading. Industry experts caution that factors like policy coverage, financial strength of the insurer, transparency, and customer service are equally vital before making a decision. Ignoring these aspects can cause major issues later when you or your family actually need the coverage.

Below are the essential points you must evaluate before choosing an insurance plan in India.

1. Policy Coverage and Sum Assured

According to Rakesh Goyal, Director at Probus, the sum assured should be the first priority after CSR. The coverage amount should be sufficient to protect your family’s financial stability in case of an emergency. Equally important is to carefully check what the policy includes and excludes. For example, in health insurance, some treatments may not be covered immediately, while in life insurance, certain conditions may not qualify for claims.

2. Exclusions, Riders, and Waiting Period

Every insurance policy comes with exclusions—conditions or treatments that are not covered. Goyal advises customers to read these carefully to avoid surprises later.

• Look for additional benefits or riders that may enhance your coverage, such as accidental death benefits or critical illness riders.

• In health insurance, check the waiting period, particularly for pre-existing illnesses.

• For motor insurance, review the availability of network garages, and for health insurance, confirm the nearest cashless hospitals.

Another key factor is premium affordability. Choose a plan with a premium that you can consistently pay over the long term without financial strain.

3. Financial Strength of the Insurer

An insurance policy is not just a financial product—it is a long-term commitment. Anup Seth, Chief Distribution Officer at Edelweiss Life Insurance, highlights that people often get attracted to lower premiums, but that should not be the only deciding factor.

He suggests evaluating the insurer’s financial strength:

• Check the Assets Under Management (AUM) to gauge stability.

• For savings and investment-linked policies, review historical returns.

• In guaranteed return plans, analyze post-tax actual returns.

• In ULIPs, compare the IRR/XIRR over multiple years and carefully study hidden charges like fund management or mortality fees.

4. Customer Experience and Transparency

CSR alone does not reflect how smooth or quick the claim process will be. Seth emphasizes that delays of several months in claim processing can cause severe stress for families. Before finalizing a policy, examine:

• The company’s customer satisfaction score (NPS)

• Independent customer reviews

• Complaint redressal mechanisms

• Availability of digital services, such as online policy access, documentation, and claim tracking

5. Coverage Based on Personal Needs

Experts agree that the coverage amount should align with your real financial needs. Factors to consider include:

• Outstanding debts or loans

• Annual household income

• Children’s education expenses

• Future commitments such as marriage or home loan repayment

Your sum assured should be large enough to cover these obligations in case of unforeseen events.

6. Claim Process Clarity

Before purchasing a policy, clarify the exact claim process with the insurer. Essential questions to ask include:

• What documents are required for claim submission?

• What is the claim settlement timeline?

• Can you nominate both a primary and secondary beneficiary?

Final Takeaway

Buying insurance is one of the most critical financial decisions you’ll make. While the Claim Settlement Ratio provides a snapshot of an insurer’s reliability, it should not be the sole deciding factor. A holistic evaluation—covering policy details, exclusions, financial health of the insurer, customer experience, and your own family’s needs—is essential. By doing so, you can ensure that your insurance policy truly acts as a safety net for your loved ones, rather than a source of frustration during tough times.