When you are looking for an insurance policy, the reliability of the insurance provider is one of the biggest concerns. Most people refrain from buying a plan because they feel insurance providers cannot be trusted. However, this is not always the case. There is a way to quantify how trustworthy an insurance provider is and it’s known as the claim settlement ratio of health insurance companies.
It is a metric used to grade health insurance firms. It compares the total number of claims filed in a year to the number of claims resolved by a health insurance provider. It allows customers to compare health insurance firms and choose the best coverage depending on the ratio.
Let’s understand why you should look at the claim settlement ratio of health insurance companies!
- Assures Great Value Products
A higher claim settlement ratio indicates that more claims are paid. It gives customers more confidence when purchasing insurance. A health insurance company’s optimal claim settlement ratio is between 80%-90%. Claim settlement ratio of health insurance companies that fall within this bracket can be considered reliable.
- Reflects Efficiency
It helps you understand how the insurer handles policyholder claims. You should also look into how long it takes for health insurance firms to settle claims on average. It should last between 20 and 30 days. This demonstrates that the health insurance provider is adept at quickly resolving claims.
- Show Reliability
You can assess the general insurance company’s credibility before making a buying decision. In general, new insurers have lower claim settlement metrics than established companies. For greater credibility, research its claim settlement history before purchasing a health insurance plan.
How Does the Claim Settlement Ratio of a Health Insurance Firm Benefit Me?
You purchase health insurance coverage to ensure that you are not financially disadvantaged in the event of a medical emergency. The claim settlement ratio of health insurance companies provides insight into the likelihood of a favourable outcome. The higher the health insurance claim settlement ratio, the greater the chances of a quick claim settlement.
How To Calculate the Claim Settlement Ratio?
Consulting firm KPMG produces an annual report listing all of the country’s insurance companies and their claim settlement ratios 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)
For example: A company settled 9,500 claims out of a total of 10,000 claims in 2019-2020. As a result, it will have a CSR of 95% (9,500/10,000*100).
Key Benefits of Looking at the Claim Settlement Ratio of Health Insurance Companies
- It gives you an idea of the insurer’s performance consistency.
- It provides financial security to the insured’s family in the event of his or her death.
- A claim settlement ratio of 80% or more will help you determine whether you can trust the company to deliver the promised claim to the insured’s nominees.
- Customers can compare two or more insurance firms with ease.
- A good CSR also gives you an insight into the company’s capability of settling claims.
What is a Good Claims Settlement Ratio?
A high claim settlement ratio indicates that a health insurance firm is financially strong, profitable, provide high-quality health insurance coverage, and satisfies client expectations.
However, the claim settlement ratio of a health insurance company is not a perfect predictor of how good a firm is. It’s also important to analyse the consistency of the health insurance claim settlement ratio over time.
A constant claim settlement ratio suggests the trustworthiness of the health insurance provider. After reviewing the company’s history over the last five years, the claim settlement ratio should be assessed.