IRDAI asks insurers to define ‘claim’: what it means for CSR comparisons
9 min read
IRDAI last week asked the general insurance industry to do something that sounds absurdly basic: define the word “claim.” Not settle one. Not adjudicate one. Just agree on what one is.
The fact that this needs asking, more than a quarter-century after IRDAI was established, tells you something about the number you trust most when buying a term insurance policy.
This directive is aimed at non-life insurers: health, motor, fire. Term insurance is life insurance, regulated separately through a different council. But the problem IRDAI is trying to fix is identical on both sides. And since claim settlement ratio (CSR) is the single metric Indian term insurance buyers have been trained to compare, understanding what it actually measures matters now, not after the next circular.
Cheat Sheet
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IRDAI has asked the General Insurance Council to agree on a standard definition of “claim.” Different insurers currently count claims at different points in the process, making CSR comparisons meaningless.
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The directive targets non-life insurance (health, motor, fire), but life insurance has the same problem. The Life Insurance Council is likely to follow.
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Some insurers count a claim when the customer reports it. Others wait until they verify policy coverage. Some count rejected-for-documents claims as “settled.” Three definitions, three different CSRs.
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A claim that an insurer calls “settled” may still be legally disputed. Former IRDAI member KK Srinivasan: a claim is only settled if the client confirms it.
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CSR above 100% is real and legitimate — it happens when an insurer clears backlogs from previous years while settling current claims.
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Always check CSR by amount (not just count), the trend over multiple years, and the breakdown of paid vs repudiated vs pending claims.
Did You Know
Life insurance has the same definitional ambiguity as general insurance. When a family calls an insurer to report a death, when does the “claim” start? At the phone call? When the death certificate arrives? When the insurer opens an investigation? Different starting points change the denominator. Different rules for what counts as “settled” change the numerator. The CSR shifts accordingly.
Three versions of a “claim”
As reported by Mayur Shetty in The Times of India (May 25, 2026), different insurance companies register claims at different points in the process. Some count a claim the moment a customer reports it. Others wait until they’ve verified that the customer has a valid policy for that particular loss. Still others close a claim as “settled” when they reject it because the customer didn’t submit the right documents.
Three companies. Three definitions. Three different CSRs. Comparing them is like comparing exam scores when each school sets its own paper and its own passing marks.
In practice, a “claim” has at least three lives. The customer’s version: I asked for money. The operations version: we registered it in our system. The accounts version: we set aside reserves for it. Each produces a different numerator, a different denominator, and therefore a different ratio. The definition determines the maths, and nobody agreed on the definition.
The discharge voucher
When an insurer settles a claim, partially or fully, they ask you to sign a document accepting “full and final settlement.” You sign because you need the money. Or because you’ve been waiting months and want closure. The insurer counts this as settled.
You may not agree.
In health insurance, this plays out over hospital bills. In term insurance, the equivalent is a partial payout on a death claim where the family believes the full sum assured was due. The family signs because they need the money now. The company books a settled claim. The gap between what was claimed and what was paid disappears from the headline number.
Watch Out
KK Srinivasan, former member (non-life) of IRDAI, told the Times of India: “In simple reality a claim can be treated as settled only if the client confirms that it is settled. Till that is done, the claim remains pending/disputed.” He added that if an insurer repudiates a claim, the policyholder can dispute it legally within three years. Once a court admits the case, that claim stays “unsettled” until the court disposes of it and the insurer complies with the order.
By that standard, a number of claims that appear as “settled” in annual reports are, in legal fact, still disputed. The published CSR counts them as closed. The courts haven’t agreed.
CSR above 100% is real
One number that confuses people. A former CEO of a non-life company, quoted in the same Times of India report, noted that a CSR above 100% is entirely possible. If an insurer clears its backlog from previous years while also settling current-year claims, total settlements exceed the claims received that year. The ratio crosses 100. Perfectly legitimate; perfectly misleading if you’re looking at a single year without context.
Gyansurance’s own CSR ranking of all 24 life insurers breaks down the difference between CSR by count and CSR by amount. The gap between those two numbers already tells you that not all “settled” claims are equal. This new IRDAI exercise goes one step deeper: before you even get to the ratio, the word underneath it has no fixed meaning.
What to actually look at
A single year’s CSR is a snapshot. A snapshot of what, exactly, depends on who’s holding the camera.
What matters more is the trend over multiple years, and the breakdown beneath the headline ratio. How many claims were paid in full? How many were partially settled? How many were repudiated, and for what reasons? How many are still pending beyond the 30 days IRDAI mandates for claim settlement decisions?
IRDAI publishes this data in its annual report. Individual insurers disclose it in their public filings. The numbers exist. They’re just harder to compare than a clean “98.7%,” which is precisely why a single ratio has become the industry’s favourite marketing number. It’s simple. It’s flattering. And it may not mean what you think.
Key Fact
The General Insurance Council has submitted its views on a standard definition of “claim” and a uniform approach to defining CSR for various lines of business. The Life Insurance Council, which covers term insurance, hasn’t received the same directive yet. But the same questions apply, and the life insurance side is likely to follow.
IRDAI has started asking the right question on the general insurance side. When the same question arrives for life insurance, the league tables that comparison websites have been publishing for years will need rewriting. The companies at the top may still be at the top. The gaps between them might look very different.
Until then, the next time someone tells you a company has a 98% claim settlement ratio, you have one question to ask back.
98% of what?
Want to see how CSR by count compares to CSR by amount across all 24 life insurers? Check our CSR ranking with IRDAI data. And if you haven’t figured out how much cover your family needs, our coverage calculator works backward from your actual expenses.
Frequently asked questions
Why is IRDAI asking insurers to define “claim” now?
Different insurance companies register and count claims differently. Some count a claim the moment a customer reports it; others wait until they verify policy coverage. Some even count rejected claims (where documents were incomplete) as “settled.” This makes claim settlement ratios incomparable across companies. IRDAI has asked the General Insurance Council to submit a standard definition.
Does this IRDAI directive apply to term insurance?
Not directly. The directive was issued to the non-life (general insurance) industry covering health, motor, and fire insurance. Term insurance falls under life insurance, regulated through the Life Insurance Council. But the same definitional problem exists in life insurance, and life insurance is likely to receive a similar directive.
Can claim settlement ratio be above 100%?
Yes. If an insurer clears pending claims from previous years while also settling current-year claims, total settlements can exceed current-year claims received. The ratio crosses 100%. It’s legitimate, but misleading without context. Always look at CSR trends over 3-5 years, not a single year.
What should I look at instead of headline CSR?
Look at CSR by amount (not just by count), the gap between count and amount, the trend over multiple years, and the breakdown of paid vs repudiated vs pending claims. IRDAI publishes this data in its annual report. Our CSR ranking covers all 24 life insurers on both metrics.
Related reading
- Claim Settlement Ratio of All 24 Life Insurers (Latest IRDAI Data) — CSR by count and by amount, with the gaps most comparisons ignore.
- Life Insurance Pending Claims: ₹283 Crore Uncollected — What happens to claims that neither get paid nor rejected.
- How Riders Affect Your Claim Settlement Ratio — Why adding riders can change your insurer’s CSR numbers.
- Insurance Reforms India 2026: What’s Changing for Policyholders — The broader regulatory changes affecting your coverage.
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Disclaimer: This article is for informational purposes only and does not constitute insurance advice. Consult an IRDAI-registered insurance advisor for recommendations tailored to your specific financial situation and needs.
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Gyansurance EditorialThe Gyansurance Editorial team is a mix of financial journalists, insurance advisors and copy editors. Together, we are aiming to demystify life insurance for Indian readers around the world.
