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 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.

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.

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.