In our earlier post we discussed about the settlement ratio, its importance and how its calculated. Today we are going to discuss about other parameters which also play a important role:
Solvency Ratio: In general solvency ratio indicates the capability of the organization to repay its debt and other financial obligations.
For insurance companies, it means the ability of the insurance company to settle all claims in adverse conditions. As per IRDAI guidelines, all insurance companies need to have a minimum solvency ratio of 150%. Higher the better when finalizing the company.
This information for each organization can be found in the individual insurance company websites or it can be found in the annual report published by IRDAI.
Claims amount Percentage: Claim settlement ratio / Percentage is calculated bases the number of claims Vs number of claims settled, but as we all know that most of the insurance policies are taken by individuals from the saving perspective, because of which the insurance coverage on such policies are very low. So, the settlement ratio will not give a comprehensive picture of how much has been settled.
Once again, we can refer the IRDAI annual report which will indicate the amount of claims received Vs the amount of claim paid. Higher the better while choosing the insurance company to opt for.
Note: Example for one company shown below, for the full list refer page # 176 and 177 of IRDA Annual report of 2018-19.