The health insurance policy comes with unique benefits to attract clients. While checking the coverage of the policy, premium, and benefits of a health plan before buying is non-negotiable, it is also prudent to check the claim settlement ratio and the incurred claim ratio of the health insurance provider. Still, numerous people confuse these two insurance terminologies. This composition states the difference between the two.
While health insurance is necessary for families and individuals, understanding the technical nuances can be daunting. If you have gone through several insurance leaflets and now find yourself confused with all the technical banter. Don't stress; you're in the best company. Health insurance plans being necessary, can be an algebraic problem to break at first. Unfortunately, there are several insurance companies that make the most out of this opportunity. They often oversell unintended coverage to clients who are unaware of this concept.
Clients should thus make informed decisions by researching on their own. Hence, it's essential to understand many vital fundamentals. Claim settlement ratio and incurred claim ratio are similar terms that play a deciding part when a policyholder files a health insurance claim. Unfortunately, the difference between the claim settlement and the incurred claim ratio is easily understood. This composition helps policyholders separate the two and provides the solutions to consider before buying a health insurance plan. Not knowing the difference between the two frequently can lead to high out-of-pocket costs.
Claim Settlement Ratio
Claim Settlement Ratio states the total number of claims settled by an insurance company to the total number of claims received. For example, the claim settlement ratio of an insurance company is 92 when the insurer feted about 92 claims out of every 100 claims entered.
The claim settlement ratio acts as a pointer to count, which helps you understand an insurance company's health.
It can be used for understanding how likely an insurance company is to settle your claim. The high is the claim settlement ratio, the high is the probability of your claim getting honoured.
Still, CSR does not consider the time taken to settle an insurance claim if a claim company can have a higher claim settlement ratio despite taking months to settle the claims.
Incurred Claim Ratio
Incurred claim ratio offers the total claim amount paid by the health insurance company to the total premium amount collected in a fiscal year. For instance, if the incurred claim ratio of a health insurance provider is 88, it means that the insurer pays INR 88 towards claim payment for every INR 100 premium collected. The remaining INR 12 is considered the profit margin for the insurance organisation.
The incurred claim ratio represents the financial health of the insurance company. It indicates how financially capable the insurance company is of paying an insurance claim. However, it means that the company is paying further towards the claim agreement than the premiums admitted if the ICR of an insurance company is more than 100. This could indicate that the insurer suffers from financial losses and may either hike premiums or reject edgy claims.
It also specified that the company's policyholders are well aware of the claim procedures and when not to avail the claim.
If the ICR of an insurance company is lower than 50, it indicates that the company is making gains by paying smaller amounts rather than the premiums they received. It states that the insurance company is rejecting further claims or is charging excessively high premiums or installments. This situation arises when most policyholders are healthy and don't raise claims, the probability of which is veritably low.
Difference Between ICR and CSR
| Categories | Claim settlement ratio | Incurred claim ratio |
| Meaning | The total claims settled to the total amount of claims received. | The ratio between the total percentage of claims paid to the total installment received. |
| Ideal Ratio | When ICR is higher, more is a probability of claim settlement. | ICR between 50% and 100% is ideal. |
| Publisher | Published by the insurance company on its authorised website or on IRDAI’s website as well. | Published by the IRDAI in its annual report. |
| Reliability | It is a less reliable indicator to calculate the health of an insurance company. | It is a more reliable indicator to estimate an insurance company's Financial health. |
| Specificity | CSR is for the whole company and its different insurance products. | ICR is specific to health insurance claims. |
| Settlement period | It does not contain the claim settlement period. | It considers the settlement period. |
People frequently get led to attractive benefits and buy a health plan without in-depth examination. To avoid being unhappy with your current health insurance policy later on or paying a higher premium, check the claim agreement ratio and the incurred claim ratio the health insurance provider provides before buying the policy. Do your research and understand the difference between CSR and ICR quickly before deciding.
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