Importance of Claim Settlement Ratio in Health Insurance

The adage, health is wealth, is rightly justified in today’s times where the entire globe is facing a pandemic and nothing, but good health and precaution, can help you sail through it. That being said, the importance of having a health insurance in India is reiterated by many. That is why it is of utmost importance to have a safety net in the form of health insurance cover.   But when it comes to selecting a health insurance policy, there are a myriad of plans and picking one may become a perplexing choice. Some commonly known factors are the process of an insurance claim, network hospitals, entry age limit, additional benefits, bonus and more. But often one crucial factor that often misses the attention is the health insurance claim settlement ratio. Let us understand why it is of critical importance and why you should check at the time of purchase.   What is claim settlement ratio in health insurance?  Health insurance claim settlement ratio is often abbreviated to CSR for simplicity. It is the ratio of the claims settled against the total claims received by the insurance company. Being a common factor for comparison, it makes it easier for you to compare the different insurance companies and simplify the selection process.     How to calculate the claim settlement ratio? Calculating the health insurance claim settlement ratio is a bit complex, but you do not have to worry. The regulator of insurance in India is the Insurance Regulatory and Development Authority of India (IRDAI). It annually publishes a report of all the insurance companies registered in the country indicating their claim settlement ratio for various insurance segments including health insurance.   The mathematical formula is - Claim settlement Ratio = All claims settled or paid / (Claims received during the year + Previous year outstanding claims)   Let us understand this using an example. Out of 5,00,000 claims made by customers, an insurance company settles only 4,00,000 claims, the health insurance claim settlement ratio comes to 80%. This indicates out of the total claims made, only 80% of them are settled by the insurer and balance are rejected.   Why is it essential to select an insurer with a high settlement ratio? Purchasing a policy from an insurer with a higher health insurance claim ratio has the following advantages -

• It helps you understand how the insurer deals with handling claims of policyholders.
• You can gauge the credibility of the general insurance company and base your purchase decision.
• Since a higher claim settlement ratio means more claims are paid, it instills confidence when buying the insurance cover.

  How does buying a policy based on claim ratio benefit you? Once you dive deeper when shortlisting an insurance company, you can understand how efficiently are the claims dealt by the insurer. Comparison of two insurance companies with almost all similar features can become simple when considering the claim settlement ratio as a metric.   As crucial it is to compare health insurance plans and multiple factors among insurance companies, it is equally important to make a note of the health insurance claim settlement ratio. So the next time you are looking for a health cover, do not forget to consider CSR too.