What is Claim Settlement Ratio in Health Insurance?

Health Insurance is a tool to protect you and your family financially when a medical emergency strikes. So it is important to choose a health insurance plan which fulfils its promise of securing your family financially from any medical emergency in the future. And even more important is to choose a health insurer that is more likely to settle your health insurance claim smoothly. After all, it’s your health insurer who pays money to your hospital to settle your health claims.

So how do you decide which health insurer is more likely to settle claims easily? Well, you need to check the operational metrics of your insurer.

One such important operational metric which indicates how efficiently and smoothly an insurer is settling claims is the Claim Settlement Ratio (CSR). 

What is the Claim Settlement Ratio in Health Insurance?

Claim settlement ratio’s in health insurance is defined as the number of claims settled by the insurer out of every 100 claims it receives.

Claim Settlement Ratio = Number of Claims Settled / Number of Claims Received * 100

A higher claim settlement ratio’s indicates that an insurer settles more claims out of all the claims it receives. It is desirable to have a health insurer by your side which showcases a good track record in terms of claim settlement ratio. The higher the number, the better it is.

So what is a good number in terms of claim settlement ratio’s? We recommend that a CSR of 90% or more is good in the health insurance industry. So choose a health insurer only if it has a CSR of 90% or more. 

Moreover, don’t look at just last year’s claim settlement numbers. This could give you a distorted picture full of recency bias. Look at the last 3 or 5 years numbers and their averages. This will tell you how the insurer has been performing over the last few years in terms of claim settlement.

Claim Settlement Ratio by Number V/s Claim Settlement Ratio by Amount

A health insurance company might not be settling all claims in full. In fact partial claim settlements are more common in health and general insurance than full claim settlement. 

Calculating CSR by just the number of policies might give an inflated picture as a claim which is partially settled would also get accounted for fully. 

If you wish to see a more clear picture on claim settlement, you can calculate CSR by the amount of claim settled during a period.

Claim Settlement Ratio of Top Health Insurance Companies in 2024

To calculate the claim settlement ratio, we took the data from NL-37 Claims Data for the FY 2023-24 and calculated the claim settlement ratio of each insurer using this formula.

Claim Settlement Ratio = Number of Claims Settled during the Year / (Number of Claims Outstanding at the Beginning of the Year + Number of Claims Reported during the Year – Number of Claims Outstanding at the End of the Year) 

And here are the CSR in terms of number of policies and absolute amount of top health insurers in India.

What does the claim settlement ratio NOT tell you?

Claim settlement ratio’s is a widely talked about term in the insurance industry. It’s a decent indicator which tells how many claims an insurer settled out of every 100 claims it received. 

But it falls short in giving you the full picture of how a health insurance company settles claims.

Here is how:

Claim experience of claimants: How your insurer responds to your request makes a big difference in your overall claim experience. CSR does not reflect the average time taken by an insurer in settling a genuine claim.

Proportion of fraudulent or unpayable claims: An insurer might receive a lot of claims which are fraudulent or not payable because the condition falls under a list of exclusions. This could happen due to lack of awareness of the customer or poor selling practices adopted by the insurance company. However, if a large number of claims are not payable due to such reasons, it would shoot up the claim rejection/ repudiation rate of the company.

Financial stability of any insurer: CSR is not an indicator of financial strength of the company. If you want to know how financially stable an insurer is, check other indicators like Incurred Claims Ratio.

Summary

Claim settlement ratio is a good metric which indicates how good a health insurer is in settling claims. It indicates the number of claims a company settles out of every 100 claims it receives. We recommend you choose a health insurer with a CSR of 90% or above.

Key Takeaways

1. CSR is an important indicator which tells us how good an insurer is in settling claims.
2. It indicates the number of claims an insurance company settles on an average out of every 100 claims it receives. The higher this number, the better.
3. CSR = Number of Claims Settled during the Year / (Number of Claims Outstanding at the Beginning of the Year + Number of Claims Reported during the Year – Number of Claims Outstanding at the End of the Year)
4. You can calculate the claim settlement ratio of all health insurance companies by checking out claims data published under public disclosures.
5. However, claim settlement ratio’s does not tell us about other important factors such as average time taken by an insurer to settle claims, volume of fraudulent or fake claims faced by an insurer or the financial strength of an insurance company.