Why Claims Paid Ratio Is a Must-Know Before Buying Life Insurance?

When buying a life insurance policy, most people focus on premium costs, policy benefits, or tax savings. However, there's one critical factor that deserves equal, if not more attention, the Claims Paid Ratio (CPR). It shows how often an insurer actually pays out claims, a true test of reliability. In tough times, CPR tells you if the company will stand by its promise when your family needs it most.

What is Claims Paid Ratio?

"CPR is a very crucial factor when considering an Insurer. It has to be measured along with Claim Settlement Ratio (CSR). As we know, CSR particularly addresses the number of claims settled against the number of claims made unlike CSR which measures the amount settled against amounts claimed," explained Abhinav Angirish, Founder & CEO - InvestOnline.in.

He further simplified the concept using the below figures.
Claims made: 1000, settled 960 = 96% CSR
Claim Amount: 100000, Amount Settled: 75,000 = 75% CPR

According to the latest annual report from IRDAI (Insurance Regulatory and Development Authority of India), Indian life insurers had an average CPR of 96.82% in 2023-24. This means nearly 97 out of every 100 claims were paid by insurers.

What does a high CPR indicates?

A high CPR shows that the insurance company is doing a good job. It means that the insurer is doing the following things.

• Settling claims quickly
• Processing paperwork smoothly
• Rejecting fewer valid claims
• Using fair and transparent assessment methods

Why CPR is Important?

Buying life or health insurance is about securing peace of mind. But if a company doesn't honour its promise when it's most needed, the whole purpose is defeated. A high CPR is a sign that the insurer stands by its customers and pays fairly, especially in difficult times.

"Hence, though CSR looks attractive, CPR reveals another picture. Disallowance of amounts in claims is more crucial than CSR in most situations. But, both indicators have to be seen under the same lens," said Abhinav Angirish, Founder & CEO - InvestOnline.in.

Don't Confuse CPR with CSR

Both CPR and CSR are important when evaluating an insurance company, but they measure different things. CSR tells you how many claims an insurer has successfully settled compared to the total number of claims received. It's a count-based ratio.

On the other hand, CPR focuses on the total amount of money paid out in claims compared to the total amount claimed. It shows whether the insurer is actually paying out the full value of the claims.

This difference is important because some companies might have a high CSR by settling a large number of small claims quickly, which looks good on paper. However, they might delay or reject bigger, high-value claims that matter more financially to customers. That's why you should always check both CSR and CPR to get a clearer and more honest view of how the insurance company handles claims-both in terms of number and value.

Some insurers may have a high CSR by settling many small claims but might delay or deny large claims. That's why it's important to look at both CSR and CPR to get the full picture.

What to Check Before Buying Insurance?

1. Check CPR and CSR - These are published every year by IRDAI on its official website.
2. Read the Fine Print - Understand the exclusions, conditions, and document requirements.
3. Update Nominee Details - Always keep your insurer informed about changes.
4. Be Honest - Full and correct disclosures at the time of policy purchase ensure smoother claims later.

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