With a rise in lifestyle-induced health issues, the importance of a health insurance cover cannot be stressed enough. This sudden pandemic has also forced us all to focus more on our health and figure out how we can safeguard ourselves in the best possible way. Unforeseen and unfortunate incidents often leave a damaging financial burden on us, and the only way we can mitigate them is by ensuring we are covered by a good health insurance plan that creates a financial safety net, not only for us but also for our loved ones.
However, not all insurance policies are alike. With a variety of products in the market, it can be difficult for insurance-seekers to narrow down on the policy that best meets their needs.
This is where the Claim Settlement Ratio comes into the picture. It is the single most important numerical feature that can help you make the crucial decision of which insurer you should opt for.
To help you understand Claim Settlement Ratio better, we have explained everything you need to know about it, below.
What is the Claim Settlement Ratio and how is it calculated?
The Claim Settlement Ratio (CSR) reveals the proportion of claims the insurer has paid out during a financial year. In other words, it is defined as the percentage of insurance claims settled by an insurer, in comparison to the total number of claims received.
It can be calculated with the formula given below:
Claim Settlement Ratio = Total Number of claims approved/Total Number of claims received
This result is represented in the form of a percentage. Suppose an insurance company has a Claim Settlement Ratio of 85%, it means that for every 100 claims received by the insurer, 85 claims are settled and paid out.
Why is Claim Settlement Ratio so important?
There might be a number of reasons for an insurance company to not make good on the claims they receive. While some can be due to lapses from the insured, like giving incorrect personal information on the forms or deliberately hiding their medical history, many of them are also due to the incompetence and untrustworthiness of the insurer.
As insurance buyers, the claim settlement ratio is an objective yardstick to determine which insurance provider is more reliable.
At the end of the day, health insurance policies can only be as reliable as the insurance company that provides them. Thus, the Claim Settlement Ratio helps us make an accurate judgment regarding the trustworthiness, proficiency, and the potential support that the selected insurer may provide.
Every financial year, the Insurance Regulatory and Development Authority (IRDAI) in India issues the Claim Settlement Ratios for every insurance company in the country. A high Claim Settlement Ratio directly can be interpreted as the company can be depended upon to provide the promised claim to the insured or their beneficiaries. It also indicates high customer satisfaction and a strong underwriting procedure for the insurance company.
This is the reason most financial advisors suggest checking the claim settlement record of any insurance company over parameters like low premiums or high benefits. We hope you will make wise choices armed with this information and knowledge.