Health Insurance

Health Insurance Claims Ratio.

The true test of a health insurance plan is when you raise a claim. If the insurance company settles the claims quickly your trust in health insurance increases and you ensure to opt for a health plan year on year. However, if there is some dispute in claim settlement, it is a cause of grief. Either because you have not followed the claim process correctly or the company is rejecting your claim on a justified basis, you get stuck with the medical expenses. Even if the insurance company settles your claim partially, the financial strain is felt by policyholders. That is why, when buying a health insurance plan, the company’s claim settlement ratio is given consideration by many. Do you understand the ratio or is it just another technical jargon which gets you confused?

What is health insurance claim settlement ratio?

The Claim Settlement Ratio, also called CSR in short, is the ratio which depicts an insurance company’s claim settlement history. It is calculated as the number of claims settled by the company against the number of claims received. So, if the company settles 90 claims out of 100, the CSR would be 90%.

Important features of Claim Settlement Ratio

The CSR has three important features which are as follows –

  • CSR is calculated for one financial year starting from 1st April and ending on 31st March. Thus, the number of claims received and settled by the insurance company during this tenure would be used to calculate the CSR. If any claim is received in the same financial year but not closed within 31st March, it would not be considered for calculation. For instance, if the insurance company receives 2 claims in March and the settlements are done in April, these two claims would be added to claims received but not to claims settled.
  • CSR takes into account the number of claims and not their values.
  • CSR is published by the IRDA (Insurance Regulatory and Development Authority) every year. This CSR gives the true data of the experience of claim settlement of insurance companies.

Is the claim settlement ratio important?

Though a lot of importance is attached with CSR, it is not a very important and correct parameter to judge an insurance company. Here are the reasons why –

  • The ratio denotes the total claims settled. It does not tell you the time taken by the insurance company to settle these claims. An insurance company should be judged based on the TAT (Turn Around Time) of claim settlement not the numbers. Since the time doesn’t factor in the CSR calculation you get no idea on the company’s average claim settlement time.

To calculate the number of claims settled, three types of settlements are considered –

  1. The number of claims for which payment has been done
  2. The number of claims rejected
  3. The number of claims closed because of no follow-up by the policyholder

Thus, claims settled represent the number of claims on which the insurance company took an action and which were closed. It doesn’t only represent the claims for which payment has been done. So, even if the insurance company has rejected a major proportion of its claims, its CSR might be higher since the reported claims have been closed. So, don’t rely completely on the CSR thinking it increases the probability of your claim being approved.

Thus, claims settled represent the number of claims on which the insurance company took an action and which were closed. It doesn’t only represent the claims for which payment has been done. So, even if the insurance company has rejected a major proportion of its claims, its CSR might be higher since the reported claims have been closed. So, don’t rely completely on the CSR thinking it increases the probability of your claim being approved.

  • CSR might also be published by insurance aggregators or distributors. Only the data published by IRDA is reliable. The other data might be distorted since you might not find the data of all insurers on the distributor or aggregator website. Even if insurance companies publish their own data you should cross-check the data with the regulator’s reports.

The final word

As stated above, CSR is not the best parameter to compare health insurance plans. Though it gives you a picture of the claim settlement experience of the insurance company, you should prioritize other factors first. First, you should find the health insurance plans available for your requirements. When you find such plans you should compare the coverage features. A plan with exhaustive features should be your ideal choice. After you are satisfied with the coverage features, the premium should be compared. You wouldn’t want to pay higher premiums, would you? Choose a plan which offers the most comprehensive coverage at the most reasonable premiums. After you are satisfied with the coverage and the premium, you can look at other factors including CSR. Though CSR should be a factor when comparing health plans, it should not be a deciding one.