The mark of a good health insurance policy is the payment made on a claim. Any product differentiation should be based on the claim servicing aspect. The parameters of add-ons, discounts, extra coverage, or a host of online/offline features should be secondary to claim servicing.
But this aspect of insurance is locked behind a number which does not deliver a meaningful distinction to buyers. For instance, the top brands in insurance have a claim settlement ratio starting from 96 per cent to 99 per cent; a highly undifferentiated range. .
We analyse the factors behind the ratio, the factors excluded in the ratio and why policyholders rather focus on contractual obligations for claim servicing and not on such numbers.
What’s in the ratio
A claim service ratio is a ratio of claims serviced in a given period to the claims admitted in that period. A claim service ratio of 97 per cent in 2023 should indicate that out of 100 claims admitted by the insurer, 97 claims were settled in that given period. A loose interpretation could also be that there is a 97 per cent chance that as a policyholder your claim would go through. and that this should be better chance than an insurer with 85 per cent claim service ratio.
So claim admittance is the key here and is dependent on policyholders’ actions - ie, the claim must made within the stipulated time, all the relevant documentation should be provided by the client, there should be no pending premium payments till that point and other relevant obligations must be fulfilled by the policyholder while filing a claim.
This implies that to be included in the calcuation of claim settlement ratio, a claim should pass an initial muster for admittance.
Thus, there are are two levels of scrutiny before a claim is paid out, but probability of only the second level is noticed by policyholders. Once a claim is made, the test of admissibility must be cleared. Only then does the probability range — 95-99 per cent of claim being paid — come into the picture. Without the success rate of claim admittance, claim settlement ratio provides only a partial picture. One might have a great shot at making a 5-minute pitch in an elevator, but the chances of getting into the elevator also constitute a crucial number.
The service levels of settlement is not included in the claim settlement ratio. Being more of qualitative aspect, service cannot be measured, but is an important yardstick, nonetheless. For instance, out of the ₹1 lakh claimed for a procedure, claim settlement of ₹60,000 or ₹80,000 makes a vast difference to the policyholder. Similarly, the time for processing the claim and the extent of policyholder follow-up required to ensure delivery can be a differentiator, which is left out by the simple ratio.
Claim settlement ratios are independent of the product mix of the insurer. A product mix leaning highly towards group policies will have a higher claim settlement ratio which cannot be replicated in a retail scenario. Hence, for a retail policyholder in insurance firm with high group coverage, the claim settlement ratio does not bear importance.
Ensuring claim settlement
Without a reliable quantitative measure, claim settlement has to be ensured by understanding the insurance contract and following the best practices. These actions are from the policyholders’ end to ensure claims are paid. The financial health of the insurer is kept in check by IRDAI anyways.
Any information gap or confusion must be addressed at the inception by the policyholders. Incomplete or untrue information at policy inception ranks high on reasons for claim rejection. Existing diseases, lifestyle habits and other personal information has to be accurately presented. Always ensure premium payment on time, with or even without grace period.
At the time of filing a claim, collect all relevant information or even remotely related information and send a complete packet to the insurer. Delays by repeated requests for information cannot be avoided but at least minimised with complete packets; lab reports, pharmacy bills, OPD consultation reports and others.