Insurance is an intangible business. Claim is the tangible portion of insurance business. The efficiency of an insurance company is judged by the way it settles its claims.Claims settlement is the central activity in insurance business. Insurance is taken, whether sold or purchased, for claims in case of loss. If there are no losses recoverable under the policy thus giving no opportunity for the insurer to pay any claims, there will be no need for insurance. Such policies will not be in demand unless the policies are required to be purchased under some statutory compulsion.

Insurance is a financial service and is intangible. Its intangible nature is the source of all problems in its marketing and management. But claims are the tangible part of insurance. This is where it sustains and makes it desirable and attractive.

Therefore, claims constitute the basis, reason and justification for insurance business. If claims are well-managed more people will opt for insurance instead of other methods of risk management like self-insurance.

Claims are required to be managed in an efficient manner so that the cost of the claims will not be too high and the claimant will be satisfied with the quality of service. The cost of claims is an important aspect to be managed so that the premiums can be kept at economic level, which will enable more people to buy insurance. To achieve this, the risks that are required under the policy and the extent of coverage also have to be carefully designed. Insurance system itself can work only if claims can be financed by the premiums collected in the long run.

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