Introduction
When selecting a health insurance policy in India, several factors need to be considered. Two important parameters for evaluating the reliability and performance of an insurance company are the Claim Settlement Ratio (CSR) and the Incurred Claim Ratio (ICR). In this article, we will explore these ratios in detail, examine how they are calculated, and explain their significance in the process of selecting a health insurance provider.
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Claim Settlement Ratio (CSR)
The Claim Settlement Ratio is an important indicator that demonstrates an insurer’s ability to settle claims. is a crucial metric. It represents the percentage of claims settled by an insurance company out of the Net claims processed during a specific period. Typically, the CSR is calculated using the following formula:
Claim Settlement Ratio = (Total Claims Settled / Net Claims Processed) 100*
Where, Net claims processed is arrived at as under:
Net Claims Processed:
| Claims Outstanding at the beginning of the year: | XXX |
| Add: Claims received during the year: | XXX |
| Total Claims to be processed: | XXX |
| Less: Claims o/s at the end of the year: | XXX |
| Net Claims Processed | XXX |
However, the calculation of the denominator can vary, leading to different interpretations of the ratio. Some calculations consider only current claims received during a year and divide them by the number of claims paid. However, this approach may not provide an accurate picture of the claims actually processed and settled during the year.
Few also calculate the CSR by not considering the O/s claims at the end of the year and arrive at CSR using the below formula;
CSR = Claims Paid/Total Claims Processed:
Where, Total Claims Processed:
| Claims Outstanding at the beginning of the year: | XXX |
| Add: Claims received during the year: | XXX |
| Total Claims to be processed: | XXX |
To obtain reliable information, it is advisable to refer to trustworthy sources such as the IRDA Annual Report, which provides claims data for all insurers. These sources can validate and consolidate the data for a more accurate assessment drawing the assumptions for arriving at CSR.
When evaluating CSR, it is important not only to consider the ratio based on the number of claims but also to take into account the ratio based on the actual number of claims paid.
Incurred Claim Ratio (ICR)
The Incurred Claim Ratio measures an insurance company’s financial stability and sustainability. It represents the total value of claims incurred by the insurer against the premium collected during a specific period. The ICR is calculated as follows:
Incurred Claim Ratio = (Net Claims Incurred / Net Premium Earned) * 100
Difference between CSR and ICR
While both ratios are related to claim-related aspects of health insurance, there are fundamental differences between them. The Claim Settlement Ratio focuses on the percentage of claims settled, indicating the insurer’s efficiency in claims settlement. On the other hand, the Incurred Claim Ratio assesses the insurer’s financial performance by considering the claims incurred against the premium earned.
Importance of Checking CSR and ICR before Choosing Health Insurance
It is crucial to consider the Claim Settlement Ratio and the Incurred Claim Ratio before selecting a health insurance policy. Here’s why:
Reliability and Trustworthiness
A high CSR indicates that the insurance company has a history of settling claims promptly, which is crucial for policyholders during times of need.
Financial Stability
A low ICR suggests that the insurance company manages its financial resources efficiently and is less likely to encounter financial difficulties when settling claims in the future.
Customer Satisfaction
A high CSR and a low ICR imply that the insurance company is committed to providing a smooth claims settlement process, resulting in higher customer satisfaction.
A bird’s eye-view on CSR, ICR and Age analysis for the year 21-22
Reviewing the Claim Settlement Ratios, Incurred Claim ratios and ageing analysis of various general insurance companies in India can help make an informed decision.
Here are some notable figures consolidated from sources such as: IRDA Annual report 21-22 and Public Disclosures of Insurer’s ( NL-37 Claims data) using the formula;
Claim Settlement Ratio(CSR) = (Total Claims Settled / Net Claims Processed) 100*
| Category | Insurer Name | CSR (No. of Claims) | CSR (Absolute Amount) | Age Analysis of No. of Claims Paid(%)<3months | Incurred Claim Ratio |
|---|---|---|---|---|---|
| Private Sector Insurers | Acko General Insurance | 75.15% | 56.94% | 97.20% | 103.75% |
| Bajaj Allianz | 94.30% | 88.79% | 96.59% | 90.64% | |
| Cholamandalam MS General Insurance | 89.25% | 78.10% | 93.23% | 117.08% | |
| Edelweiss General Insurance | 92.59% | 73.53% | 97.26% | 112.32% | |
| Future Generali | 81.45% | 79.16% | 96.01% | 88.44% | |
| Go Digit General Insurance | 87.57% | 77.54% | 96.09% | 48.94% | |
| HDFC Ergo | 95.64% | 85.49% | 98.49% | 97.47% | |
| ICICI Lombard | 87.97% | 67.95% | 97.07% | 91.67% | |
| IFFCO Tokio | 94.96% | 96.47% | 89.38% | 130.65% | |
| Kotak Mahindra General | 86.79% | 81.57% | 96.90% | 72.11% | |
| Liberty General insurance | 90.77% | 81.83% | 97.30% | 89.30% | |
| Magma HDI | 84.70% | 67.74% | 92.34% | 66.42% | |
| Navi General | 82.52% | 47.00% | 99.99% | 28.56% | |
| Raheja QBE | 94.69% | 85.12% | 93.30% | 109.54% | |
| Reliance General Insurance | 95.95% | 83.88% | 98.65% | 98.76% | |
| Royal Sundaram | 92.94% | 91.28% | 95.95% | 90.22% | |
| SBI General | 88.56% | 78.33% | 95.04% | 81.92% | |
| Shriram General Insurance | 84.30% | 25.00% | 85.23% | 37.07% | |
| TATA-AIG | 87.35% | 80.29% | 93.55% | 86.53% | |
| Universal Sompo | 90.75% | 100.00% | 95.77% | 113.39% | |
| Public Sector Insurers | National Insurance | 91.61% | 71.95% | 86.28% | 125.53% |
| The New India Assurance | 99.75% | 111.70% | 92.93% | 124.54% | |
| The Oriental Insurance | 89.25% | 99.70% | 90.18% | 139.86% | |
| United India Insurance | 97.77% | 83.81% | 97.25% | 120.21% | |
| Standalone-Health Insurers | Aditya Birla Health | 93.72% | 74.71% | 99.41% | 69.56% |
| Care Health | 87.03% | 69.47% | 100.00% | 65.07% | |
| Manipal Cigna | 89.87% | 56.53% | 99.90% | 76.17% | |
| Niva Bupa Health | 90.86% | 67.70% | 99.99% | 62.12% | |
| Star Health | 82.50% | 60.50% | 99.06% | 87.06% |
- Please Note: Bharti-AXA is merged with ICICI Lombard.
Conclusion
The Claim Settlement Ratio and the Incurred Claim Ratio are important parameters to consider when choosing a health insurance policy in India. By assessing these ratios, you can gain insights into the insurer’s reliability, financial stability, and commitment to customer satisfaction. It is advisable to review the CSR and ICR of various insurance providers before making an informed decision. Remember to obtain the actual CSR and ICR figures from the latest IRDA Annual Report or relevant official sources.
(Note : The actual CSR and ICR figures should be obtained from the latest IRDA Annual Report or relevant official sources.)
