When it comes to purchasing health insurance either for you or to family, then you will come across many more doubts, like how much insurance is suffice for you, whether you can afford it or not, which one to buy and much more. The answer to this is a simple tool developed by POLICYADVISOR. Let us look how it works and help you.
Before proceeding further, let us look at recent annual report of IRDA Annual Report 2013-14. This will also give you some inputs about whom to believe and how they are doing business.
What is the Incurred Claims Ratio?
It is the ratio of claim incurred by the insurance company to actual premium collected for that period. You may also say it as a net claim settlement cost incurred to the net premium collected for a given accounting period. Formula for calculating is as below.
Incurred Claim Ratio=Net claims incurred/Net earned premium.
For example, let us say an insurance company’s incurred claim ratio is 90%. Then what it indicates is, for every Rs.100 earned as premium, Rs.90 spent on the claims settled by the insurer. Therefore, Rs.10 is the profit to the company. If this incurred claim ratio is over and above 100%, then it indicates that they suffered a loss in their business.
What this ratio indicates?
This indicates how much you can believe in insurance companies, when it comes to claim. Usually higher the incurred claim ratio then it is good for you. This is how the health insurance company’s performance is gauged. However, when it comes to insurance company point of view, then if higher the incurred claim ratio means the company is in loss. That is the reason usually insurance companies load your premium when they incur a higher loss in particular age group segment (even though you do not have any claims in previous years).
What this ratio doesn’t indicate?
When company A and company B have a same incurred claim ratio then it is hard for you to judge who settled claims quickly. So even though it may give a clear picture about an insurance company, but still hard to find who is efficient in claim settlement.
What is the difference between incurred claim ratios to claim settlement ratio?
You can confuse yourself between incurred claim ratios to claim settlement ratio. The claim settlement ratio is the ratio of settled claims to the total claims filed in a given accounting period. Therefore, if claim settlement ratio indicates 90%, then it means that out of 100 claims filed 90 claims are settled. Remaining 10% claims are either rejected or pending with the insurance company.
Below is the latest IRDA Annual Report for 2013-14 for individual Health Insurance Companies Incurred Claim Ratio for 2013-14.
As I said above, this CIR will give you an indication of believing on these insurance companies. You may notice that none of the private health insurance companies (including standalone health insurance companies) has CIR of more than their collected premium.
Now let us move to the next step of selecting the health insurance product by using the tool of POLICYADVISOR. Here in the first place you need to enter your date of birth and city you currently live. The name of the city is important to identify the cost of health in these cities. They did some research on this to arrive at the final figures on this.
Next, you need to enter your marital status, your monthly income, whether you want to add family members or not. If yes, then add the number of members you want to cover in this policy.
Last step is to specify whether you have any existing health insurance or not. This is required to arrive at the required Sum Insurance. Along with that, you need to enter information about any health issues. Finally share the information, whether you have any major hospital expenses in last 1 year or so.
That is all what you need to do. The result will show you whether you require any health insurance or not (based on your current health insurance), ideal cover required for you (based on current requirement, the city you stay, family members you want to cover and your health status.) and the required cover which excludes the existing insurance coverage.
If you need quotes for this insurance, then you can fill up your personal data like name, email id and mobile number. This will give you the list of products.
Few assumptions that were made to arrive at required quote are as below.
- You are the eldest member of the family.
- You have an annual surplus of 3% to 4% to pay towards your health insurance premium.
- You have not exhausted the Sec.80D limit.
- Your premium affordability may vary to actual calculation. However, it is considered based on industry average.
- This is not a final recommendation. Before buying a product, consult insurance adviser or financial planner.
I know that buying health insurance involves too many data like apart from said information you may require information like co-payment clause, pre-existing diseases or many more. But by going through IRDA ICR and using the POLICYADVISOR tool at least you may come to nearer of your selection.