IRDA recently published the Annual Report for FY 2018-19. Let us find out the Health Insurance Incurred Claim Settlement Ratio 2018-19 and how to arrive at the best health insurance companies selection.
What is the meaning of the Incurred Claim Ratio or ICR?
Incurred Claim Ratio or ICR is a ratio of the total value of claims paid or settled to the total premium collected in any given year. This can be calculated as an Incurred Claim Ratio or ICR=(Total Value of Claims Paid/Total Premiums collected)*100.
For example, let us say Company ABC settled the total claim amount of Rs.90 Cr in the year 2018-19. In the same year, it collected Rs.100 Cr as a total premium. In this situation, the incurred ratio stands to be 90%.
This Incurred Claim Ratio is applicable only to non-life insurance companies. For life insurance companies, IRDA publishes Claim Settlement Ratio. I have already written a post on the same. You can refer it at “IRDA Claim Settlement Ratio 2018-19 | Best Life Insurance Company in 2020“.
What to judge from the Incurred Claim Ratio or ICR?
This is one of the criteria to identify the financial health of non-life insurance companies.
# Incurred Claim Ratio or ICR more than 100%
It indicates that for every Rs.100 they collecting as premium, they are paying more than Rs.100 as a claim for a year. In simple terms, your income is Rs.100 but your expenses are Rs.100 or more. So instead of profit, they are into a loss.
# Incurred Claim Ratio or ICR less than 100%
It indicates that for every Rs.100 they collecting as premium, they are paying less than Rs.100 as a claim for a year. Such companies are making a profit as your income is Rs.100 but expenses are less than Rs.100.
What it indicates that less ICR means the company is in profit or eyeing on profit. So either they may insure the less risky individuals or groups (customers rarely come forward for a claim) or rejecting the claims just to profit.
However, rejecting claims only on grounds to profit will not work out for any company. They have to look for reputation, future growth, and regular guidelines. Hence, simply for the sake of profit-making, they can’t deny claims.
In my view, going with companies of high ICR or low ICR is risky. Hence, always choose a company which is in between both these points.
Remember once again, ICR is not the main criterion in selecting health insurance. However, it is one of many criteria.
# Incurred Claim Ratio or ICR less than 40%
This indicates that either the company is charging higher premium rates than its peers and making a considerable profit or the insured individuals are low risks (probability of hospitalization is less).
Difference between Claim Settlement Ratio and Incurred Claim Ratio
Incurred claim ratio applies to general insurance companies. It is a ratio of the total premium collected to the total claim amount paid within a financial year. Whereas, the claim settlement ratio applies to Life Insurance Companies. It is the ratio of claims approved to total claims received.
Health Insurance Incurred Claim Settlement Ratio 2018-19 | Best Health Insurance Companies 2020
Now let us concentrate on IRDA’s Annual Report for 2018-19. We will check the IRDA Incurred Claim Ratio 2016-17 and identify which is the Best Health Insurance Company in 2020 in India.
Here, I will divide the health insurance companies into 3 categories. One as public sector companies, second as private companies and the third one as standalone health insurance companies.
You notice that all the public sector health insurance companies incurred claim settlement ratio is more than 100%. This indicates that they are under the loss.
However, the private sector general insurance companies incurred claim settlement ratio ranges from 24% to 115%.
The average Incurred Claim settlement for public sector is 109.86% At the same time, for private sector health insurance companies it is 76%
Now let us look at the incurred claim settlement ratio for standalone health insurance companies.
The average incurred claim settlement ratio for standalone health insurance is around 61%. This is a healthy sign.
Best Health Insurance Companies for 2020
Is it wise to choose a product based on the ICR? It is completely wrong. ICR or Incurred Claim Ratio will give an indication of the financial status of companies. Hence, BLINDLY following this ICR for the sake of buying a health insurance product is a MYTH.
Especially in case of buying health insurance, you have to verify the features. Hence, let me give you a glimpse of how to choose the product.
Best Health Insurance in India in 2020 -Checklist to shortlist the product
Let us move forward and identify the points before selecting the health insurance.
# Coverage Amount-Concentrate on Sum Insured and think beyond the current hospitalization expenses. If premium costing you more, then fill the gap with the super top-up plans.
# Day Care Treatment-Many diseases nowadays turned to be day care treatment. Hence, opt for a product which offers you maximum number of day care treatments.
# Buy early-Buying at the earlier age is best than postponing it. We don’t know the health issues. Hence, the insurer may reject your proposal. Hence, always buy immediately and never postpone.
# Understand the cover-Identify the features you want to cover. Covering all NOT POSSIBLE. Hence, try to identify the product which covers many illnesses.
#Individual or Family Floater-Decide whether you want to go for individual or family floater. It is always best to go for an individual if the age of any one member of the family is so high than the others. For example, in a family of 4 the oldest person’s age is 65 years and rest of other 3 members age is less than 50 years, then better to buy an individual plan for that 65 years old individual and rest 3 members can buy a family floater.
Because the premium is fixed based on the age of oldest person also.
# Entry Age and renewable clause-Check the entry age and for how long one can renew it. Usually, nowadays all plans offer you lifetime renewal.
# Identify the company which covers existing diseases at early. Usually, all insurance companies have a waiting period 3-4 years for existing diseases. However, if your concern is to cover the existing diseases, then give first priority to this point.
# Check for room rent capping. Avoid the product which restrict you with room rent capping.
# Check for the co-payment clause. Higher the co-payment means lower the premium for you. Co-payment means how much you also have to pay in a total bill. If the co-payment clause states 20% co-payment, then for all bills claimed, you have to 20% and the rest 80% will be payable by health insurance company.
# Check for exclusions. If you feel the exclusions listed may be uncomfortable to you, then skip that product.
# Check for hospital network availability in your city or town. The cashless hospital benefit is better than producing the bills and waiting for claim settlement.
# Read carefully the wordings of policy brochure. If you have doubts on any feature, then try to clarify it NOW itself.
# Avoid all common features, which companies try to highlight.
# Check for No Claim Bonus company offers.
# Check treatment wise limit if any.
# Check the premium rates. Especially check the rates for older age rates as few insurers jump the rate drastically for older age coverage.
# Finally, if you feel the sum insured you opting is not within your budget, then go for sum insured according to your affordability and opt for a super top up plans.
Hope this much information is enough for you in shortlisting the health insurance product.