Difference Between Incurred Claim Ratio And Claim Settlement Ratio In Health Insurance

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Health insurance plans serve the purpose of providing financial stability to an individual or a family against medical crisis or emergency medical needs. Medical insurance has played a great role over the years by supporting people or insurance owners with quality health treatment at best hospitals and clinics across the country.

Health policy plans come with numerous features. And it is expected of the insurance holders to understand all such features so that they can benefit maximum from the insurance plans. Some of the important features of a health insurance policy include, hospitalization costs in case of both pre and post-hospitalization, inpatient expenses, rent of private or shared hospital rooms, domiciliary costs, and cost of using ambulance. Further, there are other features like co-payments, deductibles, no claim bonuses, as well as medication charges, complementary healthcare checkups and more.

With so many interesting and multifaceted features, it becomes necessary for the policy holder to analyze and know all about them before buying a policy so that it can meet their health insurance needs.

Also Read: Smart Ways to Lower Health Insurance Premium

Along with the above features, it is also important to check the legitimacy of the insurance company that you are willing to buy the policy from. With the right insurance provider, you can avail maximum benefits and easy settlements. Thus, when searching for an appropriate policy provider, you must evaluate factors like hospitals enlisted in the network of the insurance provider, products available, ratio of claim settlement, ratio of claims incurred, and also the customer service facility offered by the insurance company etc. Once you compare all such factors, you can shortlist your options as per your requirement and buy the best health policy that suits you.

What is incurred claim ratio?

The percentage of total claims settled by an insurance company to the total number of premium value that the insured person pays to the policy provider is known as the incurred claim ratio. Thus, it is the value of the total number of claims settled by the insurance company divided by the total amount of premium that the company receives from the policy owner.

The calculation of the incurred claim ratio is done on yearly basis and thus aids the policy owner to verify the total claims accepted by the insurance provider in a year. The incurred claim ratio is regarded as one of the key factors that needs to be considered while choosing a health insurance company.

What is claim settlement ratio?

Unlike the Incurred Claim Ratio, the Claim Settlement Ratio (CSR) decides if the insurance provider you are buying the insurance from is credible enough to settle your claims immediately at the time of any health emergency or not. Here, you must consider the medical insurance companies offering claim settlement ratio of 80% and above. Also, you must compare last 5 years’ claim settlement ratio of your insurance provider to see the consistent record of immediate settlement of claims by the provider.

How to calculate claim settlement ratio?

There is a formula to calculate the CSR of a health insurance company:

Claim Settlement Ratio is equal to the number of total claims settled divided by the number of claims received plus total outstanding claims.

Thus, CSR = total claims settled / total claims received + total outstanding claims

The above formula computes the total claim settlement ratio provided by an insurance company from among the total number of claims received during the tenure of a policy. Thus, it is wise to choose a health insurance provider that supports you in hassle-free settling of your claims on timely basis, while also supporting you monetarily during the time of an immediate medical need.

Difference between Incurred Claim Ratio and Claim Settlement Ratio in medical insurance policy

Here are the basic differences between incurred claim ratio VS claim settlement ratio:

  • For selecting your insurance policy provider, the incurred claim ratio is regarded more accurate feature as it explains the ease with which you can claim your plans. On the other hand, claim settlement ratio is not regarded as an accurate pointer while considering the health insurance plans.
  • Most insurance companies take into consideration the time required to settle claims for deciding the incurred claim ratio, while claim settlement ratio is not taken into account for this calculation.
  • However, to calculate incurred claim ratio both the factors – total claims settled and total premium value – has to be of the same tenure. Conversely, it can be within six months to one year in case of claim settlement ratio.

Also Read: Pre-Existing Disease in a Health Insurance Policy

Conclusion

The importance of a health insurance cannot be denied and having a health insurance is a must for everyone. However, you also know that waiting period is a compulsory feature of all health insurance plans. And policy owners cannot claim any facility of the policy within this waiting period. Thus, it is important to buy an insurance keeping in mind the fact that you will be able to use the policy to claim a settlement request after completing the waiting period.

Also, the incurred claim ratio and the claim settlement ratio are other important features that needs to be evaluated while buying a policy.  These ratios help you in making a wise decision in terms of buying a good insurance policy. So, do check the ratios for the past five years to see the repute and reliability of the company in terms of claim settlement. These ratios are available on the official website of each health insurance company.

If you see the claim settlement ratio of health insurance companies in 2021, many top insurance providers have offered best percentages. All you need is to do some research to find and settle with the best insurance provider for your policy. So, tread cautiously and evaluate everything before buying the best policy.

Also Read: Government Health Insurance Plans and Schemes for Senior Citizens

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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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