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How important is claim settlement ratio while choosing a health insurance policy?

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Published on April 7, 2021. EST READ TIME: 2 minutes

In this pandemic time medical emergency will knock the doors at any time and might end up draining most of the savings. As most of us have learned the hard way, the importance of health insurance. Imagine having a health insurance but at the time of need it does not come handy? The claim settlement ratio is very low and claims aren’t passed. Claim settlement ratio is one of the most important factors while purchasing a new policy. We often end up ignoring it and make premium a priority. Well, that needs to change.

What is claim settlement ratio?

Claim Settlement Ratio in health insurance is one of the most vital factors to be considered while choosing a health insurance company as it tells you about the claim settling ability of the insurance provider. If the company is unable to settle the claims, then the whole purpose of purchasing insurance gets wasted. Claim Settlement Ratio or CSR of an insurance company reflects its reliability, which in turn, helps the policy buyers in decision making when planning to buy a new health insurance policy. After understanding CSR, you may want to know what a good ratio is. Generally, a health insurance claim settlement ratio exceeding 80% is considered good. However, it is vital that you do not use this ratio as the only factor to choose your insurer.

How to calculate Claim Settlement Ratio?

Here’s a simple formula to calculate the claim settlement ratio: 

(Total claims settled or paid) / (Total claims received + Outstanding claims at the beginning of the year) = Claim settlement ratio

Here’s an example that will help you understand the formula better.

A health insurance company received 1000 claims. Out of these claims, the company paid for 920 claims. 80 claims remained to be paid or were rejected. This is how we will calculate the claim settlement ratio with the formula: (920) / (1000) = 92%. It’s vital to choose for an insurance company with high claim settlement ratio while considering buying a medical insurance policy.

Why is CSR so important?

• You avail a health policy to ensure that you would not have to worry about money in case of a medical condition. The claim settlement ratio that medical insurance policy offers is a glimpse into the probability of a positive outcome in case you need to file a claim.

• Claim settlement ratio should be consistent. Always check the claim settlement ratio of an insurer for at least past five years. If there is no inconsistency and the claim settlement ratio is high, you can trust the insurer's capability to settle claims.

• IRDAI publishes the claim settlement ratio of all the public and private insurers in its Annual Report which is available on its website.

It is very important that you are not tempted to avail a health plan that is available at a  lower premium from an insurance company with an inferior settlement ratio. Although you may be able to save some money on the premium amount, there is a possibility that your claim is rejected when the need arises. The expenses you will have to incur at such times will be significantly higher than the amount you would pay towards a higher premium.

Paying slightly more to avail a health plan from an insurer with a higher CSR will be beneficial for the longer period. It is recommended you use an online health insurance compare resource to analyze the CSR of various companies to make an informed decision. You can even read customer reviews and testimony to validate the promise made by the insurer.

Disclaimer- The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.