Health Insurers Face Squeeze as Claims Ratios Surpass 90% in FY22-23

Rising Claims Ratios: Implications for Health Insurers

In the financial year 2022-2023 (FY22-23), the health insurance sector witnessed a dramatic increase in claims ratios, surpassing the 90% threshold. This marks a substantial jump from the average claims ratios of 60-70% seen in previous years. Understanding this shift is critical for stakeholders in the insurance industry.

What Does a 90% Claims Ratio Mean?

• Definition: A claims ratio indicates the percentage of premiums collected that are paid out as claims. A ratio exceeding 90% suggests that for every Rs. 100 in premiums collected, insurers are disbursing Rs. 90 in claims.
• Financial Impact: Such a high claims ratio significantly squeezes profit margins for insurers, indicating that they are paying more in claims than they are earning from premiums.

Factors Contributing to Rising Claims Ratios

1. Increased Healthcare Costs: Rising medical expenses have led to higher claim amounts, contributing to the increasing claims ratios.
2. Pandemic Aftermath: The COVID-19 pandemic has highlighted the importance of health insurance, resulting in a surge in claims as policyholders utilized their coverage more than ever.
3. Regulatory Changes: New regulations may have affected underwriting practices and claims processing, influencing the high ratios observed.

Implications for the Future of Health Insurance

The rising claims ratio is a clarion call for insurers to reevaluate their business strategies:

• Pricing Strategies: Insurers may need to adjust premium rates to ensure sustainability.
• Cost Control Measures: Implementing robust cost management strategies can help mitigate risk and improve financial performance.
• Focus on Preventive Care: Encouraging policyholders to engage in preventive health measures can reduce overall claims in the long run.

In conclusion, the health insurance industry is at a pivotal juncture, with claims ratios exceeding 90% presenting both challenges and opportunities. Insurers must adapt to these changes to maintain profitability while continuing to serve policyholders effectively.