Difference between Claim Settlement Ratio(CSR) and Incurred Claim Ratio(ICR)

Amit is a 21-year-old student who spent 2 years in lockdown owing to the COVID-19 pandemic outbreak. News channels, social media, and e-newspapers became his eyes and ears to the outside world. Health scares, and the rising cost of healthcare became a reality for him. Subsequently, he decided to take up a health insurance policy (which is an excellent financial step-up).

The only problem is - which health insurance provider should he approach? How should he decide which insurer guarantees claim settlement and which provider best suits his medical and financial goals? Taking such a significant and long-term financial decision that will solely be responsible for the quality of healthcare he receives in the future means he needs to do detailed research.

Or he could consider a few factors like the Claim Settlement Ratio, Incurred Claim Ratio, number of network hospitals, and more to finalize his health insurance provider. The first two factors, in this case, are the most commonly known. However, there is a vast difference between the two, and acknowledging this difference will help you choose the best health insurer that caters to one’s customized financial and medical requirements.

What is Claim Settlement Ratio (CSR) in Health Insurance?

The Claim Settlement Ratio in Health Insurance measures the number of claims settled by an insurance provider across a year compared to the total number of claims raised for that particular insurer. It is calculated by -

Claim Settlement Ratio = Total no. of Claims ApprovedTotal no. of Claims Received x 100

Each year, the IRDAI, or the Insurance Regulatory and Development Authority of India, releases the Claim Settlement Ratio for each insurance provider. This is done to help potential policyholders looking for a new health insurance policy or a health insurance portability option choose the best health insurance policy.

While this ratio is a crucial inclusion in the list of factors determining a health insurance provider, they have certain drawbacks and cannot be the sole determining component.

PROS OF CLAIM SETTLEMENT RATIO IN HEALTH INSURANCE

• Claim Settlement Ratio, or CSR, is instrumental in determining a provider's credibility. The higher the CSR ratio of an insurance provider, the more rapport they hold in the market about settling claims raised.
• Since each claim settlement (or no settlement) impacts the company's CSR, its consistency is easily determined over the ratio.
• The ratio is an excellent determining component when choosing a health insurance provider since claim settlement is a priority for policyholders. They invest their savings in premiums and expect efficient financial support from their chosen insurer.

CONS OF CLAIM SETTLEMENT RATIO IN HEALTH INSURANCE

• CSRs do not reflect the time invested in settling a raised claim. While the stipulated time frame to settle a filed claim is 30 to 45 days (as laid out by the IRDAI), many insurance providers fail to do this. Such delay across claim settlement becomes an inconvenience for policyholders during their time of crisis.

While for the cashless mode, the claim settlement is immediate; for the reimbursement process, if the claim settlement process is stretched, the financial burden is a major setback. Unfortunately, while the CSR reflects whether a claim was settled, it does not reflect the time taken to settle the claim.

• If you have availed of a health insurance plan from leading insurers, chances are high that you did not have to deal with a copayment.

However, under certain circumstances, say - if your plan doesn’t cover consumables (in this case, you can always avail of a health insurance add-on - the Protector Health insurance rider), or you exceed your pre-determined room rent limit, the insurance company may outright deny paying the complete medical bill.

Such inconsistencies across the total sum of claims settled are also not reflected across the Claim Settlement Ratio of a health insurance company. Hence, policyholders are blind-sighted about a crucial factor when choosing health insurance providers if they solely factor in CSR.

• The Claim Settlement Ratio of a health insurance provider reflects the number of claims settled across a year, not the total amount of the settled claim. Thus, potential policyholders cannot gauge a company's financial status or the provider’s stability for the future. Hence, the company’s risk factors are not reflected in its CSR.

What is the Incurred Claim Ratio (ICR) in Health Insurance?

Incurred Claim Ratio of a health insurance provider measures the total value of a claim settled against the total premium collected by the health insurance company across a particular year. This is measured by -

Incurred Claim Ratio = The total value of claims settled by an insurerThe total value of premiums collected by the insurance company x 100

Ever thought if a health insurance company is rolling in profits or just circling the drains financially?

Well, with Incurred Claim Ratio or ICR, you have an idea about that. Just think about this - insurers collect premiums from their policyholders over the years. How many of them raise a claim every single year?

And here’s where the ICR of any health insurance provider comes into play.

PROS OF INCURRED CLAIM RATIO IN HEALTH INSURANCE

• With ICR, one can easily determine if the insurer is paying out more over claims than collecting via premiums. This means potential policyholders gain an understanding of the company's financial stability and its long-term credibility in the insurance industry.
• As ICR reflects the insurer’s financial stability, potential policyholders also have a better idea about the company’s potential to resolve raised claims. For individuals about to take up a financial responsibility that will affect their medical treatment quality and out-of-pocket expenses, the Incurred Claim Ratio is an element that showcases the credibility of the company.

CONS OF INCURRED CLAIM RATIO IN HEALTH INSURANCE

• Much like its CSR, the ICR of an insurer fails to show the time taken to resolve a raised claim.

For a better understanding of the significance of Incurred Claim Ratio, -

CASE 1: If the ICR is less than 50%

The premium collected by the insurer is much more than the claims settled for the year.

So, while this is good news for the insurer’s business, it also shows their low interest in catering to the claim settlement for the interest of the policyholders.

• Policyholders can also expect increased exceptions when settling claims, thus increasing the chances of rejected claims.
• In such a case, the premium for health insurance policies might be high-end.
• The claim settlement process might be far less transparent.

CASE 2: If the ICR is more than 50% and less than 100%

This is the ideal balance for the policyholders and the insurers (50% to 70%). The company has optimum financial stability, and the claim settlement is well-balanced.

• The claim settlement process is more transparent.
• The premiums for health insurance policies are far more affordable.
• The claim settlement process has fewer exceptions, thereby mitigating the chances of claim rejection.

CASE 3: If the ICR is more than 100%

This ratio is not encouraging for the health insurer and the policyholders. While on the face, it might seem like the company is being cooperative with maximum claims settled, on the business front, this means the company is financially drowning.

• The health insurance provider is on the verge of a financial crash and has a dicey presence in the insurance market.
• Claims raised by the policyholders will soon start getting rejected because the provider will be in no position to offer financial support.
• To recover from the losses, the insurer will take extraordinary measures to keep themselves afloat in a competitive market. This includes chances of - hiked premiums or discontinued health insurance policies.

While the Incurred Claim Ratio and the Claim Settlement Ratio across health insurance policy providers seem to have similar drawbacks, they are vastly different. This difference in their significance makes them both an integral and mandatory part of the list of factors to consider when choosing your health insurance provider.

What is the difference between Claim Settlement Ratio & Incurred Claim Ratio?

What are the best health insurance companies with the highest CSR and ICR for 2024?

As stated before, the CSR and ICR of a health insurance provider are important factors to consider when choosing your health insurance plan. So, here are a few of the top insurance players across the market with an ideal CSR and ICR -

However, please remember that ICR and CSR are only 2 factors in a long list of elements to consider before finalizing your insurer. Regarding the other factors, here are a few: reliable credibility in the market, claim settlement history, excellent client services, rapport of a quick claim settlement process, and more.

Also, when finalizing your health insurance provider and plan, it is best to use a free health insurance comparison tool. After all, this is a crucial financial decision that will transform into a financial security net during times of health crisis. You would need tailored support for those customized requirements for efficiency and credibility.

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