The Importance of a Health Insurance Claim Ratio

 

Many people find buying health insurance very overwhelming. Since there are so many insurers in the market, finding the right fit seems almost impossible. Every health plan offers different advantages and disadvantages. So, how can a person pick one over the other? How can we decide which policy is better than others? There are many factors we need to look at before purchasing a plan. But, none are more important than the claim settlement ratio. Every insurance provider displays their claim settlement ratio on their website. The number indicates how many claims they settled as a ratio against the total number of claim requests received.

What Is Claim Settlement Ratio in Health Insurance?

The health insurance claim ratio refers specifically to claims against health policies. So, an insurance provider may offer various types of policies – health, motor, travel and more. The overall claim ratio across policies could be 98%. But, the individual ratios for motor insurance might be 97%. On the other hand, the health insurance claim ratio could be as high as 99%. When you purchase a specific type of policy from an insurance provider, it’s always best to check both the overall claim settlement ratio and the health insurance claim ratio.

How Does the Claim Ratio Help?

The claim settlement ratio tells us how many claims an insurer has paid in the last year. It helps potential customers understand the probability of receiving a settlement after filing a valid claim. With this crucial information, people immediately understand how many claims get paid and how many get rejected.

Insurers present the ratio as a percentage. Let’s assume an insurance provider’s claim settlement ratio is 90%. So, 90 of 100 received claims in a year got settled. The other 10 got rejected.

Insurance providers need to settle all claims as quickly as possible. Some people might end up receiving their settlement several months after they file a claim. Here again, the claim settlement ratio comes to the rescue. Insurers provide the ratio for different periods, such as less than three months, between three months and six months, more than six months, and so on. Look for companies with the highest ratio for the less than three month period. Insurers that fall under this bracket honour maximum claims as fast as possible. These companies probably have the best claim settlement ratio in health insurance.

The Importance of Incurred Claims Ratio

When you’re looking for a health insurance provider, you should also check their incurred claims ratio. The information tells you how much a company has paid out in claims. Mathematically, the ratio tells you the net claim amounts paid to net premiums received by the company. The incurred claims ratio provides buyers with information on how the company is managing their day-to-day affairs. So, it indicates which insurance providers would be the safest option.

What Is the Ideal Incurred Health Insurance Claim Ratio?

Insurance buyers should be wary of companies that have a low incurred claims ratio. They likely have strict underwriting processes. So, many policy applications probably get rejected. A low ratio also indicates that the premiums offered are high. Often, the premiums charged do not match up to the benefits provided by the policy. An incurred claims ratio below 50% will not provide you with the kind of benefits you need or deserve.

On the other hand, a very high incurred claims ratio is not ideal either. A ratio above 100% indicates that these companies have spent far more money settling claims than they’ve earned in premiums. So, the company is effectively running in losses.

But, if you’re looking at a new player in the market, a high incurred ratio, or one above 100%, doesn’t necessarily mean bad things. For the first few years, companies may take a while to sell policies, so their net premium remains low.

Ideally, look for an incurred claim ratio between 75-90%.

Finding the Best Claim Ratio in Health Insurance

When you purchase a policy, you must be mindful of both the claim settlement ratio and the incurred claim ratio. A high claim settlement ratio coupled with an incurred claim ratio in the range of 75% to 90% is ideal.