The health insurance market has so many options that it gets confusing for a policy buyer to decide which the best fit is. With every insurer claiming to be the best, how do you decide if their claims match their performance?
One of the ways to do this is by comparing the health insurance claim settlement ratio, which gives you an insight into the company’s performance. In this article, we will understand how health insurance claim settlement ratio works and why you should consider it before buying a policy.
What Is the Health Insurance Claim Settlement Ratio?
The claim settlement ratio (CSR) measures how many claims are settled against the number of claims filed in any given year. It is a metric used to rate health insurers. Make sure you check the claim settlement ratio of your insurer before choosing a health insurance policy.
Health insurance claim settlement ratios guide buyers in comparing health insurance companies and selecting the best plan in terms of one's claim settlement ratio. Furthermore, a higher health insurance claim settlement ratio enhances your chances of getting a quick settlement on your claim.
It is calculated using this formula:
(Total Claims Settled)/(Total reported claims + outstanding claims at the start of the year – outstanding claims at year-end)
You can find this information in a report published by the Insurance Regulatory and Development Authority of India (IRDAI). It not only breaks down the ratios of each company but also gives you a comparison between the private and public sectors.
Why Is the Health Insurance Claim Settlement Ratio Important to Know?
The health insurance claim settlement ratio is an important metric that helps you compare policies. A claim settlement ratio of 80% and above can assure you that you can depend on the insurance company to provide the promised benefit to the nominees of the insured in the event of the insured's death. Let’s take a look at some of the key reasons why you should pay attention to this ratio.
- Shows you how well the company functions
It is also important to check the average claim settlement time. Typically, the time frame should be between 20-30 days. It indicates that the insurance company is efficient at settling claims. If the company overshoots this time, then that is a red flag.
- It is an indicator of reliability
We take insurance to secure the future of our loved ones after we are gone. It would make sense to take out a policy from an insurer who can help you ensure they are taken care of. But how can you decide if they are reliable? This is where the health insurance claim settlement ratio comes in. It helps get an idea of their credibility by giving you a snapshot of their claim history in the past year.
- You get the highest value
Ideally, health insurance claim settlement ratios should fall between 80% and 90%. Companies that have between 80 and 90% of claims settled have great products and are good investments. It would make sense to go for companies with a higher ratio as they offer the widest range of health insurance products with maximum coverage and a faster claim settlement procedure.
When looking at the health insurance claim settlement ratio, go beyond the past year. If there is an inconsistent trend in the claim settlement ratio, you should look at other options. CSR should ideally be evaluated after looking at the past five years of the company. It gives you a complete picture of the company’s performance.
CSR is a good indicator of the company’s performance and should be a major factor in making a decision. It shows us whether the company is efficient, reliable, and provides the best value. So, make sure you keep an eye out for this when you are looking for the right health plan for your loved ones and yourself.