The majority of insurance clients in India make their selection based on the premium. They choose the insurer that offers the greatest deal on coverage. While the premium amount is important, another factor to consider is the insurance company’s claim settlement ratio.
Annually, the Insurance Regulatory and Development Authority (IRDAI) releases certain claim settlement ratios for all insurance providers. You must evaluate this information before selecting an insurance policy.
Understanding Claims Settlement Ratio
The claim settlement ratio is important since it indicates an insurer’s claim resolution history. As a result, while choosing one, examine the claim payment percentages of many insurers.
Let us first define what the claim settlement ratio entails.
The claim settlement ratio (CSR) of an insurance company is the number of successfully resolved claims divided by the number of requests received in a given year. For example, if XYZ company receives 100 claim requests per year and successfully resolves 90 of them, its CSR is 90%.
Many experts recommend that when obtaining a policy, choose an insurer with the greatest CSR to increase the likelihood that your selected nominee will get insurance benefits. A greater CSR also means that your family will have the necessary insurance while you are abroad.
Significance of the Claim Settlement Ratio
The general rule is that the shorter the CSR range, the greater the dependability. Because in the case of a company with a larger range of CSR, one is continually in danger of being identified at the lower end of the spectrum. The prospects of resolving the claim are greatly diminished.
Look for firms that are consistent in their claim settlements. It’s OK if you have to pass over firms with really high CSR in the process. However, one must examine CSR for the last five years.
Moreover, it provides the following advantages:
- Allows you a sneak glimpse at the insurance provider’s claim settlement history.
- Increases the buyer’s trust in their insurance, which is most likely designed to protect them in times of need.
- Makes purchasing health insurance simpler. Looking at CSR may help you compare various health insurance plans and decide which is best.
- A strong CSR exhibits dependability and efficiency from the insurance company’s perspective. A low CRS indicates a lack of efficiency in claim resolution. This information helps you better understand an insurance firm.
How do I calculate the claim settlement ratio?
The following formula may be used to compute the claim settlement ratio:
CSR is equal to the total number of claims made each year times 100.
For example, if Company A settles 8,500 of 10,000 claims between 2022 and 2023, its CSR will be 85% (8,500/10,000 x 100).
Remember that this ratio represents the total number of health insurance claims and all types of insurance that a company provides.
Claims Settlement Process
The following is a thorough claim settlement process:
Simple Reporting
Claims may be submitted online, at branches, the central office, the Claims Care hotline, by SMS, or by email. Furthermore, it makes it more accessible for the policyholder.
Submission
Once a claim has been reported, you, as the policyholder, should promptly provide all applicable papers. It guarantees that insurers evaluate and approve the same promptly.
Processing
Claims should be processed quickly to simplify the settlement process for policyholders and their families.
In recent years, technological advancements have enabled insurers to resolve claims more quickly. Sometimes the claim amount is less than Rs. 50,000 and is settled within a day.
Setbacks of Claim Settlement Ratio
The declared claim settlement ratio is the sum of all claims paid by a corporation across all of its life insurance policies and products. As a consequence, you only see an estimated ratio rather than the real proportion for each kind of policy—endowment cover, money-back policy, term insurance, kid plan, group insurance/individual cover, online plan, or offline plan, and so on.
In addition, you see a percentage rather than a number. As a consequence, it is still unclear how many claims a business has rejected.
For example, if an insurance company rejects 100 out of 1,000 claims, the claim settlement ratio would be 90%. The next year, it received 10,000 claims but rejected about 500. As a consequence, the company’s CSR increased to 95%, although it has refused other claims.
Factors to Consider When Evaluating Claim Settlement Ratios for Health Insurance Companies
While Care Health Insurance offers one of the highest claim settlement percentages, we maintain open records of our claim numbers. On our digital site, you may find information about our claims team, as well as claims procedures and settlement accounts. It helps us establish ourselves as a reliable health insurance company servicing homes and groups across India.
The following are some major criteria to consider when evaluating health insurance and its claims ratio:
- Check the insurer’s claim settlement history on the IRDAI website.
- Carefully comprehend the insurer’s claim settlement procedure and timeframes.
- Map the network of hospitals located in your region of residence.
- Go through the real reviews posted by the insurer’s consumers on the website.
- Compare the healthcare benefits of various insurers, together with the premium calculator.
- Choosing the right health insurance is difficult, particularly when there are so many alternatives to consider. That is why it is preferable to depend on information about an insurer and their service network.
How Does the Claim Settlement Ratio Help You Choose the Right Health Insurance Company?
If you are looking for excellent health insurance, you should consider the IRDAI claims settlement ratio. The study offers a thorough analysis of the yearly claims processing status of India’s main health insurance firms. The health insurance claim settlement ratio helps you identify the insurer settling the highest number of claims and simplifies the choice of a perfect health insurer.
Other reasons why you should verify an insurer’s claims ratio before finalising health coverage are as follows:
- CSR indicates how many claims are denied by the insurer each year.
- It allows you to simply compare various insurances.
- An increasing track record. CSR demonstrates a better claim-handling procedure
- A greater percentage signals immediate health and financial assistance from the insurance.
Apart from the claim ratio of medical insurance, you must also consider an insurer’s incurred claim ratio before buying any health policy. The incurred claims ratio is the proportion of an insurer’s total premium revenue to the total value of claims paid for a particular fiscal year.
For instance, an insurer has received a total of 5 lakhs under premium and settled claims worth INR 4,25,000. Here, the incurred ratio would be 85%, which translates to greater chances of receiving a higher claim amount when needed. So, check these two important ratios to pick the right health coverage for your loved ones.
How can I interpret the claim settlement ratio data?
Understanding claim settlement ratio statistics may be difficult, particularly for first-time health insurance consumers. However, it is a critical component of selecting the best insurance for your health requirements. Here’s how to interpret the claim settlement ratio data:
The claim settlement ratio is expressed in percentages, as indicated in the table above. This refers to the number of claims resolved against the total number of claims received each year. A high claim settlement ratio shows that the insurer is financially stable and resolves claims quickly.
To ensure appropriate coverage during an emergency, you must evaluate health insurance policies based on their claim settlement ratios. You may get this information on the insurer’s website or by calling them directly. To make an informed selection, you should also consider the insurance company’s claim rejection and claim pending ratios.
How to Check the Health Insurance Claim Settlement Ratio
Before purchasing a health insurance plan, you should research and compare the claim settlement ratios of various providers. This is because a medical emergency already causes a great deal of emotional stress. In such a case, the last thing you want to do is go through a convoluted claim settlement procedure just to have it denied. A health insurance policy with a high claim settlement ratio will provide you with a simple and hassle-free claim settlement procedure. So, the following is the way to examine the health insurance claim settlement process (CSR):
- Every year, the IRDA (Insurance Regulatory and Development Authority) produces its annual report, which includes a list of all health insurance claim settlement ratios.
- Check the IRDA health insurance claim settlement ratio of your preferred insurance carrier by visiting the IRDA’s official website. View the IRDA Annual Report and save the PDF for the most recent fiscal year.
- Make a list of health insurance companies’ claim settlement ratios in 2022. The higher the claim settlement ratio, the greater the odds of receiving the claim amount in the event of a medical emergency.
- Compare the coverage features of health insurance plans now provided by organisations with a high claim settlement ratio.
A health insurance plan may be provided at a reasonable rate with complete coverage and several extra perks. However, if that health insurance provider has a low claim settlement percentage, you may struggle to pay claims when you need them the most. The entire idea of purchasing health insurance would be lost.
Conclusion
An insurance company’s claim settlement ratio is a great indication that may help the buyer decide on a policy. However, a policyholder should not restrict his study to the claim settlement ratio but should also consider the coverage provided by various plans from different insurance firms.
Most health insurance claims are approved because network hospitals of health insurance providers offer cashless services. Claims will be accepted even if the policyholder is treated at a non-network hospital, as long as the treatment is covered under the coverage benefit. Understanding that no insurance company would refuse genuine claims is critical.
Finally, after considering all of this, one should pick which plan best meets his requirements.
Understanding Incurred Claim Ratio
The necessity of health insurance has been reiterated several times, but it cannot be overstated. The growing market penetration of health insurance over the past ten years is evidence of the general public’s growing understanding. With greater awareness, insurers are providing an increasing number of novel kinds of health plans to entice prospective customers to purchase their policies.
New features, better benefits, and specialised health insurance policies have transformed the health insurance industry. When it comes to selecting the ideal strategy for oneself, the average person has a lot of options. As a result, specialists have devised certain metrics for comparing various insurers and the policies they provide. The Incurred Claim Ratio is one such metric used to assess an insurer’s performance.
Simply put, the Incurred Claim Ratio is the ratio of net claims resolved by the insurer to net premiums received in a given year. Here’s the formula:
The incurred claim ratio is calculated as follows: net claims incurred / net premiums collected.
So, if firm ABC collects Rs 10 lakh in premiums in 2018 and pays a total claim of Rs 9 lakh, the incurred claim ratio for that year would be 90%.
Significance of the Ratio
A higher Incurred Claim Ratio is excellent news for you, the investor, or the current policyholder since it signifies that the firm is effectively fulfilling claims filed against it. As a result, you may place more faith in insurers with a high Incurred Claim Ratio.
A greater ratio means fewer earnings for the insurer. In the above example, a 90% ratio shows that 90% of the premiums collected or generated over the year are used to pay claims, with the remaining 10% used to cover the profit margin. If the ratio rises to 95% in 2019, the insurer’s profit will decline from 10% to 5%, which is negative for the company’s revenue experience but positive for the client. A ratio greater than 100% implies that the firm is losing money since premium collections are inadequate to cover claims, and the insurer is most likely using its reserves to settle claims, which is bad news.
Points to Consider
Though the Incurred Claim Ratio is a helpful way to assess the company’s performance, it does not provide a complete picture.
Time taken to pay claims: For starters, although the ratio compares the claims resolved to the premiums received, it does not account for the time required to settle the claims. So, although the insurer’s ratio may be in the 90–95% area, the claim settlement procedure may be long, lasting 4-6 months, and the experience may be stressful for you. So, on the one hand, you, the consumer, are taking off your sandals and circling the insurer for claim payment, while your insurer is postponing the claim while keeping a favourable ratio.
New participants: Because the ICR measure is a ratio, a smaller denominator may provide a larger quotient number. A greater ICR in this case might indicate that the firm is a new insurance provider in the market and has collected fewer premiums in previous years.
Low early earnings: start-up insurance may not generate a significant premium in its first few years of business, and claims may be high. As a result, the Incurred Claim Ratio will likely exceed 100%, which should not be read as the insurer incurring a loss since the first years may have a greater claim frequency.
As a result, whereas Reliance, New India Assurance, Bharti AXA, Apollo Munich, and HDFC Ergo have dramatically raised their Incurred Claims Ratios, Bajaj Allianz, National Assurance, Max Bupa, and United India have seen a decrease.
How to Read Incurred Claim Ratios?
In health insurance, the claim ratio indicates a company’s financial health. An insurance firm with the best claim ratio in health insurance suggests it is doing well. Let’s look at the incurred claim ratio figure and what it represents.
The health insurance company’s incurred claim ratio is more than 100%.
What if the incurred claim ratio exceeds 100%? A ratio greater than 100% implies that the insurance firm is not in a favourable situation. It signifies that the insurer has spent more money paying claims than it has earned in health insurance premiums.
These figures result in a financial loss. This ICR bandwidth is unsustainable for the firm. They will incur losses and begin rejecting claims shortly. These insurers will have to take severe measures to recover from this position.
The incurred claim ratio of the health insurance business is less than 50%.
If the ICR is less than 50%, it means the insurance firm prioritises its own business before claim settlement. The corporation earns a lot of money, but it doesn’t treat its policyholders well. The claim settlement will be between 0 and 50% of the total premiums collected in a single year, indicating that the firm has received much more premium than the claims it has paid out.
The health insurance claim procedure is likely to be less transparent, and the policy’s cost will be greater. Because the policy may include several exclusions, there is a significant risk of claim denial.
The health insurance company’s incurred claims ratio is more than 50% but less than 100%.
If the ICR falls between 50 and 100%, it indicates that the insurance firm is financially solid. The insurer can conveniently handle insurance claim payouts based on the total premiums collected for the year. This is the perfect condition for both the health insurance business and the policyholders.
The insurance coverage will be less expensive, and the claims procedure will be more transparent. The policy will have a fair number of features, and the exclusions will not be too strict. The claim payment procedure will be simple, and policyholders will be mainly satisfied.
The recommended range for the incurred claim ratio is 70% to 90%.
Difference between Incurred Claim Ratio and Claim Settlement Ratio
Do not get confused between the incurred claim ratio and the claim settlement ratio (CSR). These are two different yet necessary jargon often used in the health insurance segment. It is essential to understand the difference between these two terminologies to make an informed decision. The incurred claim ratio of the health insurance companies is the total amount of claims paid over the total premium received during the year. Simultaneously, the claim settlement ratio is the number of claims paid over the total claims received by the health insurance company during the year. Opt for the company with an average ICR but a higher CSR to stay in a win-win situation.
Over to you!
Be cautious while selecting a health insurance provider since a low ICR will create problems for you. What good is a health plan if the claim is not resolved quickly? Compare the ratios, consider other criteria like plan features, coverage, and premium cost, and choose the plan that best meets your requirements.