Key Highlights
- IRDAI seeks standard definition of insurance claims
- Uniform claim settlement ratio framework under discussion
- Different insurers currently follow different calculation methods
- Experts say rejected or disputed claims should not be treated as settled
- Move aimed at improving transparency and customer trust
- Standardization may impact insurers’ financial reporting and reserves
- Customers likely to get clearer comparison of insurance companies
IRDAI Pushes for Standard Definition of Insurance Claims Across Industry
India’s insurance regulator is moving toward bringing greater transparency and consistency in the non-life insurance sector by asking companies to adopt a uniform definition of “claims” and “claim settlement ratios.”
The move comes after concerns emerged that different insurance companies are using different methods to calculate claim settlement figures, often creating confusion among customers and making it difficult to compare insurers fairly.
According to industry sources, the Insurance Regulatory and Development Authority of India (Insurance Regulatory and Development Authority of India) has asked the General Insurance Council to submit recommendations for a standardized approach that can be followed across the industry.
Why the Issue Matters
Claim settlement ratio is considered one of the most important indicators in the insurance sector. It helps customers understand how efficiently an insurance company settles claims and reflects the company’s financial reliability and customer service standards.
However, insurers currently follow different practices while counting claims.
Some companies register a claim immediately after a customer files it, while others recognize it only after verifying liability under the policy terms. Similarly, some insurers classify rejected claims or claims closed due to incomplete documentation as “settled,” even if the customer remains dissatisfied.
Experts say this creates an uneven picture of the actual number of claims being successfully resolved.
Industry Experts Raise Concerns
Former IRDAI member K K Srinivasan said that a claim should only be considered settled when the customer accepts the resolution completely.
According to him, disputes over rejected claims can continue for years through legal proceedings, and such claims should not be treated as settled until courts or dispute forums issue final decisions and the orders are fully complied with.
Insurance experts believe a standard definition will improve transparency and help policyholders better evaluate insurance providers before purchasing policies.
Impact on Insurance Companies
The proposed changes could significantly affect how insurers report their performance metrics.
A broader definition of claims may force insurance companies to set aside higher reserves for disputed or pending claims, potentially impacting underwriting profits and financial reporting.
Industry observers also note that claim settlement ratios can vary from year to year depending on how many old pending claims are resolved during a particular financial period.
Push for Greater Transparency
The regulator’s move is seen as part of a wider effort to strengthen consumer trust in India’s insurance sector. Standardized reporting norms would allow customers to compare insurers more accurately and reduce the possibility of misleading claim settlement figures.
The final framework is expected to bring more clarity to how insurance companies define filed claims, rejected claims, disputed claims, and fully settled claims.
