What Is the Claim Settlement Ratio and What Does It Tell About Your Insurer?

One of the most important factors to consider when evaluating health insurance plans is an insurer’s track record in settling policyholders’ claims promptly and fairly. After all, you don’t want to end up stuck with a policy that refuses to help you in your time of need. One calculation you can use to understand an insurer’s credibility is the Claim Settlement Ratio or CSR. CSR is like a report card every insurer publishes on its website for potential customers to evaluate.

Understanding the Claim Settlement Ratio

Claim Settlement Ratio is the percentage of claim settlements an insurer does against the number of claims received annually. It serves as a measure of an insurance company’s reliability and commitment to fulfilling its obligations to policyholders by promptly processing and settling claims.

How is CSR different from the Incurred Claim Ratio?

The Incurred Claim Ratio or ICR indicates the percentage of premiums an insurer disburses for claims. A lower ICR implies efficient management of claims expenses compared to premium collections, signalling financial strength. Conversely, a higher ICR may signify struggles in controlling claim costs.

Let’s have a look at the following table to understand how it differs from CSR : 

Calculating the CSR

When buying insurance, it is recommended that different insurers be evaluated based on claim settlement history. Getting a policy from an insurer with a better CSR reflects that the chance of claim servicing and you getting the best benefits is higher.

Here’s the formula to calculate CSR

CSR = (Total claims settled by the insurer/Total number of claims received) * 100

For example, suppose insurance company A had 10,000 claims filed during 2022-2023 of which they settled 9,500 claims. Their CSR = 9,500/10,000 * 100 = 95%.

Other Claim Settlement Indicators

You must know that claim settlement includes both claims served and claims rejected. Hence, it is critical to look up on some additional types of ratios that deal with claim settlements : 

• Claim Repudiation Ratio: The ratio of the total number of death claims an insurer receives to the total number of claims it receives.
• Claim Pending Ratio: This is the total number of death claims the insurer has not settled, divided by the total number of death claims they have received in a year.   
• Claims Paid Rate Percentage: The claim paid ratio by amount indicates the percentage of the total value of claims submitted to an insurance company that is ultimately paid out.
  

Why does the CSR of an insurer matter while buying health insurance?

CSR reflects the insurer’s reliability in honouring its commitments to policyholders. Compare the claim settlement by a health insurance company with other insurers when choosing a policy. A good health insurance company will always have a CSR of above 85%.

Other parameters to evaluate your insurer

Apart from CSR, there are several parameters you can use to evaluate health insurance companies. These parameters can supplement your list of the top 10 Claim Settlement Ratios of companies to find the best insurance company for you.

Some of these parameters are:

• Number of policies issued
• Number of claims serviced
• Average days required for claim settlements
• Percentage of claims settled in less than 30 days
• Percentage of complaints received on overall claims
• Incurred Claim Ratio
• Number of cashless hospitals
• Number of network hospitals
  

Key takeaways

Claim Settlement Ratio is the perfect indicator of an insurance company’s financial health. However, to have a holistic analysis of the insurer, you must also look at additional indicators, such as the IRDAI rating and the parameters mentioned. Always research well when choosing a health insurance plan to have adequate financial support during your time of need.