Will the insurance claim settlement ratio change? IRDAI proposes insurers show claim performance…

The latest market report highlights that When you compare health insurance policies, the claim settlement ratio can look like a simple number to judge an insurer. But the number can depend on how claims are counted and how the ratio is calculated. The Insurance Regulatory and Development Authority of India (IRDAI) has now proposed standardising how insurers disclose product performance and quality, including claim settlement performance.

Why the claim settlement ratio could look different

The consultation paper points out that insurers at present use different definitions and methods to report performance. It gives health insurance as an example. The consultation paper says, "For example, insurers offering health insurance publish claim settlement ratio by count, i.e., number of claims decided as a proportion of number of claims received."

That stated, the number of claims decided can include claims that were paid fully, paid partly, repudiated or rejected. IRDAI as a result says the way the ratio is calculated can give a different picture from the perspective of a policyholder.

It adds, "From policyholders’ perspective, the claim settlement ratio based on amount is relevant, i.e., the total amount of claim payments as a proportion of total amount of claims received."

In simple terms, a ratio based on the number of claims tells you how many claims were decided, while a ratio based on the amount involved looks at how much money was actually paid compared with the total amount of claims received.

Standardised disclosures proposed

IRDAI says guidelines for standard definitions, measurement and disclosure of product performance and quality parameters are proposed to be issued as subsidiary instructions. The paper additionally notes that information on claim settlement performance and grievance redressal is not generally available in a comparable and easily accessible format.

"There is a lack of consistency in making a distinction between a grievance and a service request. Grievances often get recorded as service requests and do not get included in performance or quality disclosure," per the consulting paper.

The broader proposal is to make product, pricing and quality information easier to compare, so customers can assess insurers using more consistent information before buying a policy.