Unlocking Schedule NL-47: How to use annual public disclosures to pick the best health insurance policy

Insurance companies publish hundreds of pages of detailed information every year. While these disclosures are valuable for investors and other stakeholders, they can be difficult for an ordinary customer to navigate when trying to decide which health insurance policy to buy.

Before purchasing health cover, there are several straightforward questions you should ask. What does the policy cover and how much does it cost? How many claims does the insurer pay? Do customers frequently complain about the product? Is the buying process simple for first-time customers? And how many policyholders continue renewing their policies?

A significant portion of this information can be found in Schedule NL-47 of insurers’ annual public disclosures. Unlike disclosures that combine data across an insurer’s entire business, NL-47 provides product-level information. This allows prospective buyers to assess the specific health insurance plan they are considering.

Coverage, Pricing and Exclusions

Coverage and premium details are generally the easiest information to find. Insurers provide product brochures, advisors can offer comparisons, and the policy wording contains comprehensive details for customers willing to go through the fine print.

Exclusions and waiting periods deserve particular attention. The insurance regulator has standardised several policy definitions and introduced requirements such as lifelong renewability, providing customers with a common minimum level of protection across insurers.

Claim Settlement Rate

NL-47 provides the claim settlement ratio for individual products, showing the proportion of claims that insurers pay.

Settlement performance can differ substantially between products sold by the same insurer. Ideally, buyers should look for policies with claim settlement rates above 90%. Some rejected claims can be justified, such as OPD expenses claimed under a policy that does not cover them or claims involving pre-existing diseases where the applicable waiting period has not yet been completed.

For one standalone health insurer, product-level claim settlement rates varied from around 92% to 97%.

Another important indicator is the incurred claims ratio (ICR), which measures claims paid as a proportion of premiums collected. An ICR above 100% could eventually lead to higher premiums or greater scrutiny of claims. On the other hand, a significantly low ratio could indicate relatively expensive premiums or comparatively lower claim payouts.

For the same insurer, ICRs across individual products ranged from 52% to 107%. A policy with a claim settlement rate above 90%, combined with an ICR that is neither excessively high nor unusually low, may offer greater comfort to prospective buyers.

Complaint Data

NL-47 also provides product-wise information on customer complaints. Insurers separately publish company-level grievance data, while the Insurance Ombudsman publishes annual complaint figures for individual insurers.

When comparing insurers, customers should focus on complaint rates rather than simply looking at the total number of complaints. Larger insurers naturally receive more complaints because they have a much larger customer base.

Complaint rates can also vary sharply among products offered by the same insurer. The grievance rate of an insurer’s better-performing products may be only about one-third of that recorded for its weaker offerings.

Understand the Buying Experience

Not every aspect of the customer experience is captured in public disclosures. Insurers generally do not report how quickly they issue policies, how often they reject proposals or how frequently premiums are increased because of medical conditions.

To get a clearer picture, prospective buyers can speak to people who have purchased the specific policy they are considering. It is also useful to consult an experienced insurance advisor who has dealt with multiple insurers and can provide insights into their efficiency and approach to customers.

Renewal Rates

NL-47 also helps address another important question: whether policyholders continue renewing their policies.

The disclosure provides product-level renewal rates, showing the percentage of policies renewed out of those that became due. It also provides an age-wise breakdown indicating how many policies have remained active for one year, three years, five years and longer.

A high renewal rate, combined with a significant number of long-standing policies, can indicate that customers continue to see value in the product.

For one leading insurer, renewal rates across products ranged from approximately 87% to 95%. The age-wise data provides additional insight. One widely sold product had around 4.5 lakh active policies, including nearly two lakh that had remained active for five to 10 years and almost 30,000 that had been in force for more than 10 years.

Such figures suggest that a substantial number of customers continue to renew the policy over the long term, making renewal behaviour another useful factor to consider before buying health insurance.