IRDAI Flags Misleading Claim Settlement Ads, Calls for Standard Formula

IRDAI, India’s insurance regulator, has expressed concern over how insurers are showcasing their claim settlement performance. Over the past year, the regulator has noticed a rise in advertisements claiming unusually high settlement ratios, even though the audited numbers tell a different story. This gap has raised worries that customers may be relying on manipulated figures for choosing their insurers.

Why Do the Numbers Don’t Match?

The main issue comes from how insurers calculate settlement ratios. There is no single industry-wide method, and each company uses its own base.

• Some count only the claims they consider “payable,” excluding those that were rejected or are still under review.
• Others calculate ratios using terms such as “assessed” or “reported” claims.

These differences create settlement ratios that appear attractive in advertisements but do not match the audited figures presented in official filings.

What Does the Real Data Show to IRDAI?

Industry-wide data for 2023–24 offers a clearer picture of claim outcomes:

In health insurance alone, insurers processed nearly 2.7 crore claims, paying out around ₹83,493 crore. The average payout was a little above ₹31,000, showing that most claims were for small or routine medical expenses rather than large hospitalisation bills.

New Standard Formula on the Way

To remove inconsistencies, IRDAI has asked insurers to adopt one common method to calculate settlement ratios across all major insurance categories, including:

• Health
• Motor
• Fire
• Marine
• Personal accident

This will ensure that the numbers presented in advertisements match audited figures and that customers can make comparisons more confidently.

What Should Consumers Focus On?

IRDAI also wants insurers to provide more context beyond a single settlement percentage. Important details include:

• How long claims take to process
• How many claims face documentation issues
• How often claims are denied due to policy terms

These factors affect real-life experience far more than a single headline number but are rarely featured in promotional material.

Read more: IDFC FIRST Bank Grants 8.2 Lakh Employee Stock Options; Converts ₹2,623 Crore CCPS to Equity.

Conclusion

The regulator’s move aims to protect consumers from misleading marketing and to bring more transparency to the insurance sector. With a uniform calculation method on the horizon, policyholders will soon be able to compare insurers on fair and reliable grounds. Until then, customers should look beyond glossy settlement ratios and pay attention to the finer details that define the actual claims experience.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.