Health Insurance Claim Settlement Ratio Explained

When it comes to making long-term financial decisions, such as buying health insurance, a good amount of research is necessary. One should look at various factors before finalising a health insurance plan and the insurer. To evaluate the insurer, you should look at their credibility and reputation mainly. One legitimate factor that can help you evaluate them in these regards is the claim settlement ratio. In simple terms, this ratio may tell you how likely your claims are to be settled with a particular insurance company. * Hence, it should be given due importance. Let’s learn more about the health insurance claim settlement ratio .

What Is a Claim Settlement Ratio?

Claim Settlement Ratio or CSR is a ratio that tells you the percentage of claims paid out by an insurance company. It is calculated by taking the total number of claims settled by the insurer against the total number of claims filed in that particular financial year. This value can be used to determine the probability of your claim getting settled in the future and therefore, insurers with higher CSR are preferred. For example, if 100 claims are filed out of which 80 are settled, then the CSR would be 80%.

Formula to Calculate CSR

Essentially, the CSR is a ratio indicating the number of claims an insurance company settled as compared to the claims they received in a year. The ratio is usually expressed through a percentage. The formula for calculating the CSR is as follows: (Total number of claims settled/Total number of claims received) x 100 = CSR Let’s understand the concept of health insurance claim settlement ratio with the help of the following example:  XZY Insurance Company Ltd. received a total of 1000 claims in the year 2020-2021. Out of the 1000 claims, XZY settled a total of 950 claims. Thus, the claim settlement ratio of XZY Insurance Company Ltd. shall be computed as: (950/1000) x 100 = 95%  So, the claim settlement ratio of XZY Insurance Company Ltd. was 95% for the year 2020-21. Usually, a CSR of 95% is considered good in the insurance sector. The higher the claim settlement ratio, the better it may be for the policyholder. This is because it shows the insurer’s dedication towards settling the policyholder’s claims. A higher CSR can mean that the insurer makes efforts to settle claims and compensate the claimants.

Types of Health Insurance Claim Ratio

There are three types of health insurance claim ratio that you should know:

• Claim settlement ratio
• Claim repudiation ratio
• Claim pending ratio

Why Is the Claim Settlement Ratio Important When Buying Health Insurance?

Now that you may have a basic understanding of the CSR, let us look at why it should be considered when buying health insurance.

It helps you compare insurance companies

Comparing health insurance policies before finally buying the right one is important. It ensures that you get the best features within your budget. The claim settlement ratio of an insurance company can tell you how reliable the insurance company is. Thus, when you compare the CSR of one company with the other, you can get a clearer understanding of where your claims have a higher chance of being settled.

It offers you peace of mind

When there is a medical emergency, the last thing you would want is for your health insurance claim to be rejected and for you and your loved ones to bear the financial burden of the situation. Aside from the emotional stress of the medical emergency, the need of having to pay for hefty medical expenses may also lead to financial worries. If you opt for a medical insurance provider with a high claim settlement ratio, the chances of your claim being rejected are lesser. This higher likelihood of claim approval can prove a positive sign and help you relieve worries related to finances during medical emergencies.

It helps you get better value for money

When you buy health insurance, the main intention you may have in mind would be to provide financial protection to your family against medical events. You are willing to pay premiums every year just to ensure that, when the time comes to raise a claim, it would be duly settled, and financial compensation would be quickly provided. However, if the chances of your claims being settled are low, following through with the health insurance process and paying premiums may not seem to be highly worth it. You may not get the value for your money that you may be looking for. Hence, it can be beneficial to look at the CSR and consider its value when buying health insurance.

What Is Considered as a Good Claim Settlement Ratio?

Mostly a health insurance claim ratio of more than 80% is considered as good but CSR should not be the only deciding factor. Also, there are many other aspects that play a vital role in getting suitable health plans. Hence, it is always recommended to go through the customer services offered by various insurers and the terms and conditions of the plan. You can also contact any friends or relatives who have bought medical insurance to reaffirm your research before finalising the policy.   While assessing the health insurance claim settlement ratio, you might also come across terms such as repudiation or pending ratio. Let’s understand these terms better:

Claim Repudiation Ratio

This number tells you the percentage of claims rejected by the insurance provider. For example, if the ratio is 30%, it means that out of 100, only 30 cases were rejected. The ratio can be calculated by taking the total number of claims rejected against the total number of claims filed by policyholders. Now, the reason for claim rejection can be claims that fall under the exclusions, pre existing diseases not covered in your policy, false claims, failure to intimate the insurer on time and many others.

Claim Pending Ratio

Such a health insurance claim ratio reflects the number of claims that are pending and haven’t been accepted or rejected. For example, if the claim pending ratio is 20%, then out of 100 claims there are 20 cases which are pending. This value can be calculated by taking the total number of outstanding claims against the total number of claims filed by policyholders. There can be many reasons as to why some claims are pending. Some of them can be due to ongoing validation of hospitalization expenses or unfurnished doctor’s certificates.

Is the Claim Settlement Ratio Enough for Evaluation?

There are many other factors that can determine how reliable an insurance company is and how beneficial your insurance plan is. You must also take factors such as the coverage of the plan, the number of network hospitals with the insurer, the customer services provided by the insurer, and so on, into consideration. For instance, you must check how easily you can know your health insurance claim status after you have raised a claim. Moreover, the claim settlement ratio may be low or high due to various other reasons. For instance, if a natural disaster were to occur and many policyholders were to raise claims at once, the claim settlement ratio would increase considerably. In normal situations, the case may be different. Hence, one must have a comprehensive outlook when considering the claim settlement ratio and buying health insurance.

Importance of Claim Settlement Ratio

Health insurance Claim Settlement Ratio is crucial for policyholders as it reflects the likelihood of your claim getting settled. When you purchase a policy, the objective of this investment is to secure your loved ones from a medical emergency. But if your insurance provider doesn’t pay out during your time of need, the entire point of having insurance goes in vain. This is why CSR can be a good indicator of insurers who are willing to pay-out when the time comes. Lastly, we recommend going through the insurance claim process for your policy in order to file claims efficiently when needed while avoiding the possibility of rejections.   * Standard T&C apply. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.