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Understanding the Pros and Cons of Incurred Claim Ratio

By Finserv MARKETS - Dec 31,2019
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Incurred Claim Ratio

Health is wealth and a sickness or injury becomes a drain on your finances due to expensive medical treatment. It adds to the stress of the family if the patient is the sole breadwinner of the family. In this scenario, a good health insurance policy takes care of your medical bills, hospitalization costs and even hospital follow-ups post discharge.

While it is easy to go in for a particular mediclaim policy recommended by someone, it is always wiser to compare and choose from various health insurance policies available online. On Finserv MARKETS, you can find a wide variety of plan variants to choose from – an individual health plan for yourself, a separate plan to insure your family and a top-up plan to ensure enhanced coverage.

Before selecting your preferred plan, there are many factors to consider while choosing an insurance policy that serves your needs and suits your goals. One of them is the incurred claim ratio (ICR) which many say should be one of the top-most parameters to zero in on a perfect health insurance policy.

Here we discuss the pros and cons of choosing a health insurance policy based on ICR.

What is incurred claim ratio?

Incurred claim ratio or ICR is the ability of an insurance company to settle claims for that period. For example, if an insurer’s claim ratio is 80 %, it means that of every Rs 100 earned as premium, the company spends Rs 80 on settling claims made by the customer. The remaining Rs 20 is the company’s profit.

Thus, ICR = Net claims incurred/net claims settled

Pros of choosing a policy based on ICR

  1. Good indicator of claim settlements:

Many experts assert that ICR should be one of the important factors to choose a health insurance policy. An ICR between 50-100% is considered a healthy percentage. A percentage below 50 (i.e. a whole lot more money is paid by the customer as premium than the money paid out by the insurer as settlement) shows that the insurance company may be primarily profit-oriented and is hardly handing out claim money to the insured. A percentage above 100 (i.e. more claims settled by insurer than premiums paid by customers) is a red flag from a business perspective. Since this would be a loss-making company, it would hamper the company’s ability to sustain itself and make future premium payments. It may also mean that the company may hike up its premium rates in the future. Thus, the ICR is a good metric to understand the settlement-paying ability of the insurance provider.

  1. Goes beyond the CSR:

Claim Settlement Ratio (CSR) is the ratio of the number of claims received by the insurance provider to the number of claims paid out by the insurance provider. The CSR is the most common metric used while deciding upon an insurance provider. However, the CSR does not go the whole mile. While it showcases how often the insurance provider settles claims, it does not give an accurate picture of whether the insurance provider’s future ability to settle claims smoothly. The ICR, on the other hand, accurately showcases, both, how often a provider pays out settlements and whether it can sustain itself well in the future.

Cons of choosing a policy based on ICR

While many consider ICR to be the sole deciding factor in choosing a health plan, a high ICR may necessarily not be the good news in terms of business.

  1. Time taken to settle claims:

Some insurers manipulate ICR by delaying the settlement of insurance claims of customers. Their ICR may be in the healthy range of 75 % to 85 % but they may take months to honor claims. They will of course pay your bills in the same financial year, but delay the payment. What is the point if you are not reimbursed for your medical expenses on time? This will deplete your savings and cause stress while you are recuperating.

  1. Not a good gauge for start-ups:

For start-ups, the ICR metric wouldn’t come in handy. Since most start-ups may not have earned a hefty sum as premiums during their infant stages, the amount paid out as settlements would likely exceed the amount received as premiums. Thus, the ICR would almost always be above 100% and not provide an accurate picture to the customer. The customer would need to take into consideration other factors as well.

Hence, when you go to buy health insurance online, do check the insurer’s ICR. You can opt for the Bajaj Allianz Health Insurance policy on Finserv MARKETS. Since Bajaj Allianz has an ICR of 77%, you can rest assured that its settlement-paying ability is sound.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.


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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522