In the insurance sector, a fast and hassle-free claim settlement experience often determines the credibility and trustworthiness of an insurance company. So, what is a claim settlement ratio and why is it an important factor to be considered before signing up for a policy?
To be precise, the claim settlement ratio measures the percentage of health insurance claims that an insurer settles during a financial year, pitted against the total number of claims received. This gives an idea of how dependable the health insurance company is and how likely they are to honor a claim.
Claim settlement ratio is one of the most vital metrics to determine if a certain insurer and policy are right for you.
It is calculated by = Total number of insurance claims settled / Total number of claims filed
The Insurance Regulatory and Development Authority of India (IRDA) publishes a list of claim settlement details of health insurance companies for the public every financial year. One can use the information from IRDA’s health insurance claim settlement ratio to choose an insurer with a proven track record of settling claims yearly.
A claim can be denied, especially when there are some red flags in the policy draft or violations by a policyholder. However, these should be exceptions, and a diligent insurer should have a high claim settlement percentage.
A higher claim settlement percentage means that your health insurance will cover you financially during medical emergencies. Your health insurance provider needs to offer quick disbursal of funds and cashless facilities for your timely treatment.
The following points detail why a health insurance’s claim settlement ratio is so important.
A health insurance’s claim settlement ratio can be calculated using a simple formula:
CSR for a financial year = (Total Claims settled/Total reported claims) %
Thus, if an insurer has received 100,000 claims in a financial year and settled 99,000 claims while rejecting 1000 claims, their CSR is:
CSR = (90,000/100,000) % = (0.9X100) % = 90%
Following are a few key factors to consider while looking at a health insurance’s claim settlement ratio:
It’s far more difficult for the larger insurance agencies to fulfil all claims, simply because they get a lot of them.
A larger number of claims tell us that the insurance company is old and established in their business. Having a high CSR ratio and a larger number of claims makes an insurance company even better.
The CSR ratio refers to the number of claims settled for all insurance products of a company put together. This means that the ratio will reflect claims processed for all policies and policy types of a company – whether it’s general insurance, health insurance, or life insurance.
The Insurance Brokers Association of India (IBAI) publishes the claim settlement ratio of all health insurance companies in its General Insurance Claim Insights every year. The report published on its official website shows the data for all private and public insurance companies. You can also view the same information on the annual report of IRDA’s claim settlement ratio of health insurance companies.
You should check the CSR ratio of a company for a long time before choosing to buy health insurance. Opt for an insurance policy if the company has a high CSR ratio for the past five years.
A reliable insurance company will honour all eligible claims and process them most swiftly. So, the higher the claim ratio of health insurance, the better will be the insurance company. It also indicates that the company has its finances in order, as it can easily pay the claim amount of a high number of claimants.
Generally, a settlement percentage of 85% to 95% is considered a good CSR for insurance companies.
With the Navi health insurance app, you can enjoy a Claim Settlement Ratio of 97% for cashless claims across a network of 10,000+ cashless hospitals.
This is the ratio between net incurred claims to the net premium received by the insurance company. It tells you what percentage of its income an insurance company pays towards settling claims. A lower number indicates that the insurer has very strict claims processing or charges a very high premium.
The claim pending ratio gives information regarding the percentage of outstanding claims of an insurer against the total claims they have received.
This ratio provides information about the percentage of rejected claims over the total number of claims.
Even if an insurer has 90% to 95% CSR, having a high claim processing time means that the claimant will have to wait for a long time. This would make for terrible health insurance as the claimant will want funds during an emergency.
A health insurance’s claim settlement ratio provides an easy metric for potential buyers to judge the insurer. However, it is not the only metric one should judge an insurance company on. Buyers should also take note of other factors such as how long the company takes to process claims, hospital network coverage, plan benefits, and more.
How to check the claim settlement ratio of an insurance agency?
You can check the CSR ratio of all insurance companies in the annual report released on IRDA’s official website.
Can my insurer reject my claims for any reason?
Most insurance companies process and approve legitimate claims without any hassle. However, they can reject claims if they discover that you have pre-existing conditions or if your treatment is excluded in the policy.
Does a claim settlement have a time limit?
Yes. Health insurances come with a time limit to apply for a claim to mitigate the chances of fraudulent practices.
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