Claim Settlement Ratio in Health Insurance

Claim Settlement Ratio in Health Insurance

Claim Settlement Ratio (CSR) in the health insurance industry is a critical metric that reveals the percentage of claims settled by an insurer compared to the total claims received in a financial year. A good CSR is typically between 95% and 100%, reflecting the company’s ability to settle claims efficiently and effectively.

The Claim Settlement Ratio is a direct indication of trust in the insurance sector, showcasing the insurer’s reliability and commitment to policyholders. It is essential for policyholders to consider the CSR of an insurance company before purchasing a policy, as it reflects the company’s claim support and settlement track record.

A high Claim settlement ratio signifies a high claim settling ability, providing policyholders with confidence in the insurer’s reliability and financial stability. 

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What is the Claim Settlement Ratio?

The term “claim settlement ratio” typically refers to the ratio of the number of claims paid by an insurance company to the total number of claims received by the company within a specific period.

According to the IRDA Annual report during the Financial Year 2022-23, the aggregate net incurred claims for the insurance industry saw an increase of 6.22 per cent over the previous year amounting to Rs 1,49,313 crore ( Rs 1,40,566 crore during the previous year). 

The claim settlement ratio can vary across different types of insurance, such as life insurance, health insurance, or general insurance. The average CSR for health insurance in India is approximately 94.2%.  While CSR is not the only factor to consider when choosing an insurance provider, it is an important metric that reflects the insurer’s credibility, reliability, and commitment to customer service. 

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How is the Health Insurance Claim Settlement Ratio Calculated?  

The health insurance claim settlement ratio is calculated by dividing the total number of claims settled or paid by the insurance company by the total number of claims received, including any outstanding claims at the beginning of the year. The formula for arriving at the claim settlement ratio is as follows:  

Claim Settlement Ratio or CSR =Total claims settled or paid/total claims received + any outstanding claims at the start of the year 

​For example, if a health insurance provider settles 90 out of 100 claims made by its customers in a certain year, the CSR would be 90%. If in the following year the same insurer settles 250 out of 290 claims made and has 10 outstanding claims from the prior year, the calculation for the CSR would be as follows: 

CSR=(250/290+10)×100=83.33%.  

This calculation method helps policyholders and stakeholders assess the insurer’s performance in settling claims and provides insights into the company’s claim resolution history and efficiency in honouring claims. 

Why Is the Claim Settlement Ratio Important When Choosing an Insurance Provider? 

The claim settlement ratio is an essential factor to consider when choosing an insurance provider for several reasons. Here are a few of the reasons: 

1. Reliability and trustworthiness 

A high claim settlement ratio reveals that the insurance company has a track record of settling a significant portion of the claims it receives. This demonstrates confidence that claims are likely to be settled promptly and fairly when needed, which means reliability and trustworthiness.  

2. Customer service

Health insurance companies with high claim settlement ratios typically have efficient and responsive claims processing systems in place. They prioritise customer satisfaction by handling claims efficiently, providing support throughout the claims process, and addressing policyholders’ concerns promptly. 

3. Financial stability

A high CSR is often indicative of the financial stability and strength of an insurance company. It suggests that the company has sufficient resources to honour its obligations and pay out claims, even during challenging economic conditions. 

4. Peace of mind

Knowing that an insurance provider has a high claim settlement ratio can provide policyholders with peace of mind. This helps alleviate worries about potential claim denials or delays during times of illness, accidents, or emergencies. 

5. Comparison tool

The CSR serves as a useful tool for comparing different insurance providers and their performance in settling claims. Policyholders can use this information to make informed decisions and choose insurance companies that demonstrate a strong commitment to honouring obligations.

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Claim Settlement Ratio of Health Insurance Companies 

The CSR for health insurance companies in India varies, with different insurers having different ratios. In fact, companies that were top of the list in a particular year could tend to drop lower in the subsequent years and those that were lower could rank higher. The CSR tends to vary according to many other factors.

In India, there are government regulations that require health insurance companies to disclose their claim settlement ratio. The Insurance Regulatory and Development Authority of India (IRDAI) mandates all insurance companies, including health insurers, to disclose their claim settlement ratios annually. By mandating the disclosure of claim settlement ratios, the IRDAI aims to provide transparency and enable policyholders to make informed decisions when choosing a health insurance provider.

It’s important to review multiple sources and consider various factors beyond just the claim settlement ratio when evaluating health insurance providers, including coverage options, premiums, customer service, and network of hospitals and healthcare providers.

Top 10 Health Insurance Companies in India by Claim Settlement Ratio

Here is a list of the top 10 companies that have demonstrated high claim settlement ratios, indicating their efficiency in settling claims and providing reliable health insurance services to their customers. 

Health Insurance Claim Settlement Process

The health insurance claim settlement process involves several steps that policyholders must follow to ensure efficient and hassle-free claim settlement. Here are the key points, depending on whether it is a cashless settlement process or a reimbursement process.  

1. Cashless Claim Settlement Process (Step by Step)

• Inform the insurer at least 2 days before planned hospitalisation or within 24 hours in case of emergency. Provide the necessary details like policy number, patient name, hospital name, reason for hospitalisation, etc.

• The hospital will contact the insurer and send a pre-authorisation form to initiate the claim settlement process. The insurer will verify the policy details and coverage.

• The insurer will approve the cashless facility if the treatment is covered under the policy terms and conditions. If any additional information is required, the insurer may take some time to approve the claim.

• Once the claim is approved, the hospital will provide treatment to the patient. The patient only needs to provide valid ID proofs and a copy of the insurance policy/card.

• At the time of discharge, the hospital will send the final bill to the insurer. The insurer will settle the approved amount directly with the hospital.

• The patient may need to pay any non-payable items, co-payments or deductibles as per the policy terms. The hospital may take a small advance for this purpose.

• The patient should obtain documents like the final bill, payment receipt, discharge summary, etc., from the hospital.

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2. Reimbursement Claim Settlement Process (Step by Step) 

• Inform the insurance company within 7-15 days of discharge from the hospital. Provide the necessary details like policy number, patient name, hospital name, reason for hospitalisation, etc. 

• Pay the hospital bills upfront and collect all the original documents like discharge summary, hospital bills with detailed breakup, paid receipts, lab reports, first consultation letter, etc. 

• Fill out the reimbursement claim form available on the insurance company’s website. Provide the required information accurately. 

• Submit the duly filled claim form along with the original documents to the insurance company. You can submit it online or by post. 

• The insurance company will verify the claim and documents. If any additional information is required, they will reach out to you. 

• Once the claim is approved, the insurance company will settle the claim amount by crediting it to your bank account. The turnaround time is generally 20 days from the date of receiving all documents. 

Documents Required for Claim Settlement 

Here are the key documents required for claim settlement in health insurance: 

1. For Cashless Claims

• Pre-authorisation form filled out by the hospital 

• Photo ID proof of the patient 

• Address proof of the patient 

• Copy of the health insurance policy or card 

The hospital will directly coordinate with the insurance company and submit the necessary documents. The patient only needs to provide ID proofs and insurance details. 

B. For Reimbursement Claims 

• Duly filled claim form provided by the insurance company 

• Original hospital discharge summary 

• Original hospital bills with detailed breakup 

• Original pharmacy bills 

• Original diagnostic test reports 

• First consultation letter from the doctor 

• Cancelled cheque or ECS form for bank details 

• Photo ID proof of the patient 

The patient needs to collect all the original documents from the hospital, fill out the claim form, and submit it to the insurance company for reimbursement. Some additional documents may be required in specific cases, such as FIR in case of an accident or death certificate for loss of life.  

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How Can a Low Claim Settlement Ratio Impact Policyholders?

The benefits of a high CSR for policyholders are significant and include: 

1. Low trust and confidence 

A low claims settlement ratio would lower trust and confidence in the insurance company’s ability to honour claims. Policyholders may be concerned about the insurer’s financial stability and efficiency in handling claims.

2. Financial stress  

A low ratio suggests that the insurer is not settling a significant portion of filed claims, which can lead to dissatisfaction and financial stress for policyholders.  

3. Adverse demand for the products of the company 

A low claims settlement ratio can have a negative impact on demand for insurance products from that company. Policyholders may be hesitant to purchase policies from insurers with a poor track record of claim settlements. 

4. Difficulty in getting claims approved  

Policy holders may find it difficult to get claims approved even for legitimate reasons. Insurers with low ratios may scrutinise claims more strictly, leading to higher rejection rates. 

5. Impact on customer satisfaction and loyalty  

Policyholders who have poor claims experience are less likely to renew their policies or recommend the insurer to others. In short, a low claim settlement ratio erodes trust, increases the risk of claim rejections, and can lead to financial difficulties and dissatisfaction for policyholders.  

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Importance of High Claim Settlement Ratio for Policyholders 

A high claim settlement ratio is crucial for policyholders for several reasons, which are as follows: 

1. Trust and credibility

A high CSR indicates that the insurance company has honoured a significant number of claims, showcasing their commitment to policyholders. This instills trust and confidence in the insurer’s ability to fulfill its promises during times of need. 

2. Financial security 

The primary purpose of insurance is to provide financial protection in times of crisis. A high claim settlement ratio ensures that policyholders can rely on the insurer to provide the necessary financial support when required.  

3. Ease of claim settlement 

A high ratio implies that the insurer efficiently processes and settles claims, making the claim filing and settlement process simple, convenient, and transparent for policyholders. This ensures a smooth experience for policyholders during what can be a stressful time. 

4. Confidence in benefits 

Policyholders can have confidence that their claims will be successful when needed if they choose an insurer with a high claim settlement ratio. This assurance is vital for policyholders to feel secure about the benefits they are entitled to under their insurance policies. 

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Benefits of High Claim Settlement Ratio 

The benefits of a high CSR for policyholders are significant and include: 

1. Swift reimbursement 

A high claim settlement ratio ensures that policyholders receive prompt reimbursement for their claims, reducing financial stress and providing reassurance during challenging times. 

2. Customer-centric approach

Insurers with a high CSR often have a customer-centric approach, prioritising policyholders’ satisfaction and ensuring a positive claims experience. 

3. Trustworthiness

A high claim settlement ratio signifies the insurer’s dependability and trustworthiness. It shows the insurer’s commitment to fulfilling their promise to pay the sum assured, providing policyholders with confidence in their financial security. 

4. Value for money 

Policyholders paying premiums for insurance seek value for their money. A high CSR ensures that policyholders get value for their money, as they can be confident that their claims will be settled efficiently when needed. 

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Factors Affecting the Claim Settlement Ratio of an Insurance Company 

Factors affecting the claim settlement ratio of an insurance company include:

1. Efficiency of the insurance company

Companies with streamlined and well-structured procedures for claim assessment, verification, and settlement are more likely to have a higher CSR. Efficient processes ensure that valid claims are processed promptly and accurately, leading to higher customer satisfaction.

2. Policyholder’s adherence to terms and conditions

Policyholders must adhere to the terms and conditions outlined in their insurance policies. This includes timely premium payments and providing accurate information during the application process. Failure to comply with these requirements can result in claim rejections or delays, impacting the overall claim settlement ratio.

3. Disclosure of material facts

Insured individuals must disclose all material facts about their health, past insurance coverage, occupation, and income accurately in the proposal form when availing insurance. Material disclosure leads to informed underwriting decisions and facilitates hassle-free and faster processing of claims, ultimately affecting the claim settlement ratio.

4. Claims’ value

The value of claims settled by an insurance company is also a factor to consider. While a high claim settlement ratio is positive, it is essential to assess the total claim amount settled by the insurer. A high ratio may not reflect the size of claims settled, so understanding the total claim amount is crucial for a comprehensive evaluation of the insurer’s performance.

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How to Check the Claim Settlement Ratio of Health Insurance Companies?

To check the claim settlement ratio of health insurance companies, you can follow one or all of these methods:

1. IRDAI Report 

The Insurance Regulatory and Development Authority of India releases an annual report that includes the claim settlement ratios of different insurance companies in India. You can access this report to compare the claim settlement ratios of various health insurance providers and choose a reputable insurer with a high ratio. 

2. IBAI Report 

The Insurance Brokers Association of India also releases annual reports that contain information on the claim settlement ratios of insurance companies in India.  

3. Insurer’s Website 

Most insurance companies in India publish their claim settlement ratios on their official websites. By visiting the websites of different insurance providers, you can easily check and compare their claim settlement ratios to determine the reliability of the insurer in settling claims. 

Also read: Pre and Post Hospitalisation in Health Insurance

How Do You Choose a Health Insurer with a High Settlement Ratio?

To choose a health insurer with a high settlement ratio, follow these steps: 

1. Research 

Conduct thorough research on different health insurance companies and their claim settlement ratios. Look for insurers with consistently high ratios, indicating their reliability in settling claims promptly and efficiently. 

2. Consider incurred claim ratio 

3. Evaluate customer reviews 

Look for customer reviews and feedback regarding the claim settlement process of different insurers. Positive reviews indicating smooth and hassle-free claim settlements can help you choose an insurer with a good settlement ratio. 

4. Compare benefits and features 

Compare the coverage benefits, features, and network hospitals offered by different insurers. Choose a health insurer that not only has a high claim settlement ratio but also provides comprehensive coverage and benefits that meet your healthcare needs. 

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Conclusion 

To sum up, the Claim Settlement Ratio in health insurance is a critical metric that policyholders should consider when selecting an insurance provider. A high CSR indicates the insurer’s ability to consistently settle claims, providing policyholders with financial security and peace of mind during times of need.

By focusing on CSR, policyholders can gauge the reliability, trustworthiness, and commitment of an insurer in honouring claims promptly and efficiently.  Additionally, the Claim Settlement Ratio serves as a tool for policyholders to assess the insurer’s track record, customer service quality, and overall performance in claim settlement over time.  

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