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# Health Insurance Claims Ratio – A Guide to Understanding How Claims Ratios Work

By : , Delhi, India       21.11.2018         Mail Now

Every year, billions of people across the world invest billions of dollars in the health care industry. They purchase health insurance and pay their premiums religiously with the hope that when they need to use it, their insurance company will step up. Health insurance provides you with a sense of relief when a medical condition is diagnosed. Whether you contract a critical illness, or you need a minor surgery, your insurance policy bails you out. As a policy holder, it is integral that you understand the different claim ratios.

Your health insurance typically comes with three integral claim ratios. These are:

Claim Settlement Ratio: When people decide to purchase a health insurance policy, they typically look at the insurance provider’s reputation for claim settlement. A Claim Settlement Ratio refers to the claim solving ability of the insurance company. You can tell how good an insurance company is from its claim settlement ratio. It also gives you information about the percentage of the claims settled and the duration of time within which an insurance provider settles claims made by the policy holder. So, if you read that a company has a 75% claim settlement ratio, it simply means that 75 out of every 100 claims made are settled by the insurer.

Claim settlement ratio is calculated as under:

(Total Claims Settled)/ (Total Reported Claims + Outstanding Claims at Start of Year – Outstanding Claims at End of Year)

The above equation simply denotes the number of claims accepted and cleared by the insurance company in a given year.

Claim Repudiation Ratio: Claim Repudiation Ratio sheds light on the percentage of claims that the insurance providers reject in a given year, due to whatever reasons as per the policy agreement. So if a health insurance company claims to have a 15% claim repudiation ratio, it means that 15 out of every 100 claims are rejected. The number one reason for an insurer to reject a claim is if they find it to be false. Untimely intimation and coverage not part of the policy are other reasons why claims are rejected.

This is how Claim Repudiation Ratio is calculated

Claims repudiation ratio= (Claims rejected/total claims) %

Claims Pending Ratio: This refers to the outstanding claims that an insurance provider has not settled as yet. This means that the claim has neither been accepted nor rejected at the moment. So if an insurance provider has a claims pending ratio of 30%, it means that 30 out of every 100 claims are yet to be assessed. They are settled only after the investigation of the claim is completed and approved by the insurance provider.

Claims Pending Ratio is calculated using the following equation

Claims pending ratio= (Claims outstanding/total claims) %

The most common reason why a claim could be pending settlement is that the policy holder has yet not furnished the necessary documents such as doctor’s certificates, detailed bills etc. The claim is settled only after the insurer validates all documents and expenses incurred.

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