Health Insurance: Decoding Recent Claims Ratio And Settlement Trends

When you file a health insurance claim, how much of your hospital bill do you expect to be covered? For some policyholders, the final amount reimbursed (or paid) can be disappointingly less than what they would anticipate. The recent data by the Insurance Brokers Association of India (IBAI) for the fiscal year ending March 2023 on ‘Claims Insights’ shows that over 20 private health insurance companies paid less than 80 per cent of the amount claimed by insured patients. 

For instance, suppose you claimed a medical bill of Rs 2 lakh your insurer reimbursed only Rs 1,60,000 (or less) - leaving you to bear the remaining portion of medical costs.

Public v/s Private Insurers

However, the data shows that public sector insurers, namely, New India Assurance, Oriental Insurance, National Insurance, and United India are leading the pack.

Amid all four, New India Assurance has achieved a claims-paid ratio of 98.74 per cent (for number of claims) and 95.04 per cent (for amount of claims). Following closely behind, Oriental Insurance shows a payout ratio of 97.35 per cent by value and 95.04 by volume.

These numbers indicate that if a policyholder claimed Rs 1 lakh, these insurers paid nearly the full amount leaving minimal out-of-pocket expenses for customers. 

Private insurers, on the other hand, presented a more fragmented picture. The data highlights that while some standalone health insurers like Aditya Birla Health showed a claims-paid ratio of 94.47 per cent by volume, other big players like HDFC ERGO (71.35 per cent) and ICICI Lombard (63.98 per cent) lagged in terms of claimed amount paid ratio.

Such disparity points towards the risk of partial reimbursements, wherein insurers would often cover up to 60-70 per cent of the hospital bill, leaving policyholders to cover the remaining 40-30 per cent of the bill.

Outstanding Claims: The Hidden Metric

Where claims-paid ratios show immediate payouts, the claims-outstanding ratio reveals whether insurers are efficient in processing claims overall. Here, public sector insurers led the way with New India Assurance reporting an outstanding claims ratio of just 6.7 per cent by volume, indicating a minimal backlog.

Some private insurers like Bajaj Allianz showed a higher outstanding ratio of 21.66 per cent by volume. This can lead to backlogs which turn into frustrating waits for policyholders during the time when they are already dealing with health issues.

Standalone health insurers performed well in this area, with Aditya Birla Health Insurance reporting a mere 1.54 per cent outstanding ratio.

Another factor that hugely defines a policyholder’s experience is the mode of claim settlement by their insurer. As per the Insurance Regulatory and Development Authority of India (Irdai’s) Annual Report data for 2022-23, 56 per cent of claims were settled via cashless mode while 42 per cent were processed as reimbursements.

Cashless claims settled directly between hospitals and insurers, provide immediate relief for policyholders. Whereas in the case of reimbursement claims, patients first have to pay out of pocket and then seek repayment, often leading to delays, disputes, or incomplete settlements.

What is the key takeaway for policyholders?

For the customers, the data emphasises the importance of careful research before finally choosing a health insurer. Here’s what you should keep in mind while searching for insurers:

- Check the claims ratio which will help you find out about the higher claims-paid ratio (both by value and volume) of the insurer and understand their reliability for the same.

- Verify or ask about the outstanding ratio of your insurer. A low claims outstanding ratio ensures timely processing and settlement

- It is important to verify the cashless networks of the insurers. Typically insurers with expensive hospital networks and efficient cashless facilities can offer a smoother experience

- Understand the policy terms before buying a plan is important to understand what is covered and the exclusions that might impact your claim amounts.