5 Factors to Consider When Choosing a Health Insurance Company
Choosing a health insurance policy suited to your specific needs, with a premium affordable by you is important. Equally important, however, is opting for the right health insurance company from which to invest in a health insurance policy.
Here are some of the most important factors to keep in mind when choosing your health insurance company.
1 Claim Settlement Ratio
Claim Settlement Ratio (CSR) is a percentage that reflects the total number of claims settled with respect to the total number of claims received by the insurance company. In other words, the CSR gives you an idea of the possibility for the insurance company to settle a claim that you are likely to make. While it is justified for insurance companies to reject duplicate or fake insurance claims, it is peculiar if an insurance company rejects most of the claims it receives. Therefore, insurance companies that have a low claim settlement ratio are likely to reject most claim requests received by them – which puts you in a vulnerable position at the time of an emergency need.
CSR = Number of claims settled / total number of claims received
2 Incurred Claim Ratio
Incurred Claim Ratio (ICR) refers to the total amount paid by the insurance company to settle insurance claims in a year with respect to the total amount collected by the company as premiums from all its insured. If the amount paid by the company is more than the premium it receives, this means that the company is running on a loss and may not be able to pay for claim requests in the future. However, if the ICR is too low (less than 50%), then it means that the company is not paying enough in terms of settlements. Therefore, a balanced ICR (between 75% – 90%) is what establishes an insurance company’s ability to pay and its reliability.
ICR = Net Claims Incurred / Net Earned Premium
3 Solvency Ratio
Solvency Ratio (SR) is used to measure a company’s ability to meet its debt and other obligations by determining if its incoming cash flow is sufficient to meet liabilities. It is preferred to opt for an insurance company with a higher solvency ratio as this means that it has a higher proportion of asset holdings. is preferred while a low solvency ratio indicates that the company may not be able to pay for claims.
SR = Net Income / Total Liabilities
4 Network Hospitals
Most insurance companies today come with a list of network hospitals they are affiliated with. At these hospitals, the insured are allowed to opt for cashless treatment. Cashless treatment means that the insured patient need not pay for the treatment they are availing (other than co-pay/co-insurance amounts). The hospital will directly deal with the insurance company or its TPAs and arrange to get paid for the services it has offered free of cost to the insured patient.
On the other hand, if the insured patient avails treatment in a non-network hospital, he/she will first have to pay for the treatment and then apply for a reimbursement from the insurance company. A good health insurance company will have a long list of network hospitals – with plenty of options for the insured to choose from, preferably within their own locality.
5 Business Volume
Business volume refers to the total number of active customers, who are paying monthly or quarterly premiums to the insurance company. This can also be determined by the number of policies sold by the insurance company in any given year.
Naturally, the company with with a large business volume is considered to be more trustworthy, simply because it is likely to have the resources required to pay for claims.
The importance of making an informed choice when investing your money cannot be emphasised enough. We hope that this list will enable you to choose wisely.
You may also refer our blog on Top 10 Insurance Companies in India to guide you in the quest for the right insurance company.