The ICR is the ratio of total value of all the claims settled by an insurer to the total value of all the premiums collected by the insurance company during a specified period of time. In simple terms, incurred claim ratio settlement tells us about the ability of the insurance company to pay a claim.
An incurred claim ratio of 50% to 100% is generally considered the most optimal claim settlement ratio and is a good indicator that the insurance company is providing a good product and taking efforts to educate its subscribers regarding claim processes.
Here is the list showing Incurred Claim Ratio of health insurance companies in India for the year 2020.
Insurance Company |
Claim Ratio in Health Insurance |
IFFCO Tokio General Insurance |
95.66% |
The Oriental Insurance Company |
92.71% |
New India General Insurance |
91.99% |
Bajaj Allianz General Insurance |
81.96% |
HDFC ERGO General Insurance |
73.69% |
Edelweiss General Insurance |
113.05% |
National Insurance Company |
103.30% |
Royal Sundaram General Insurance |
81.50% |
ICICI Lombard General Insurance |
69.90% |
United India Insurance Company |
104.24% |
Tata AIG General Insurance |
66.61% |
Bharti AXA General Insurance |
77.50% |
Star Health Insurance |
65.91% |
Kotak Mahindra General Insurance |
49.22% |
Acko General Insurance |
21.08% |
Aditya Birla Health Insurance |
49.08% |
Claim Ratio in Health Insurance signifies the financial health of a company. An insurance company showing the best claim ratio in health insurance means the company is doing well. Let us take a look at the incurred claim ratio value and what it denotes.
What if the incurred claim ratio is above 100%? A ratio above 100% indicates that the insurance company is not in a good position. It means the insurer has spent a considerable amount settling claims versus the amount it collected in health insurance premiums.
Financially, these numbers are loss-making. This ICR bandwidth is not sustainable for the company. They will be facing losses and will start rejecting claims soon. These insurance companies will have to take drastic steps to recover from this situation.
If the ICR is less than 50%, it indicates that the insurance company favours its own business over claim settlement. The company is earning high benefits, but it is not favourable toward its policyholders. The claim settlement will amount to 0-50% of the total premiums received in a single year i.e. the company has received a lot more premium than the claims it has been paying out.
The health insurance claim process will likely be less transparent and the cost of the policy will be on the higher side. The chances of claim rejection will be high as the policy may have a lot of exceptions.
If the ICR is between 50 and 100%, it signifies that the insurance company is financially stable. The insurer can easily manage the insurance claim settlements using the total premiums received in the year. This is an ideal situation for the health insurance company and the policyholders.
The insurance policy will be affordable and the claim settlement process will be more transparent. The policy will have a good set of features and the exceptions will not be too stringent. The claim settlement process will be easy and the policyholders will be mostly happy.
The ideal range of the incurred claim ratio is between 70% to 90%.
Now, you may have understood the Incurred Claim Ratio meaning. So, let us learn how to calculate the Incurred Claim Ratio:
ICR = Net Claims Incurred / Net Earned Premium
Let us consider the following example to understand the formula better.
Consider that the insurance company you are planning to buy health insurance from has an incurred claim ratio of 95%. The premium is ₹100. The 95% ICR means that the insurance company will use ₹95 for settling claims out of every ₹ 100 the company receives as a premium payment. Therefore, the profit of the company will be ₹5.
Take a look at the various health insurance plans you can opt for:
Name of the Plan |
Best Features |
Check Plans |
Bajaj Allianz Health Insurance |
|
|
Aditya Birla Health Insurance |
|
|
Care Health Insurance |
|
|
Before buying a policy, you should consider a few other factors when calculating the ICR of a health insurance company. They are:
Claim Settlement Time
You should check the claim settlement time of the company you choose. Even if the insurer has a high ICR, it may take more than six months to process the claim. Such a scenario is not favourable.
New Entrants
Since incurred claim ratio is a ratio, a low denominator will show a high quotient value. If a new insurance company in the market has collected a lower number of premiums in the initial years, it may indicate a comparatively higher ICR. There is nothing to be concerned about because they may have witnessed many claims in the initial years.
Check out the comparison of the incurred claim ratio for health insurers in India given below.
Health Insurance Provider |
ICR 2018-19 (in %) |
ICR 2019-20 (in %) |
Aditya Birla Health |
58.61 |
49.08 |
Bajaj Allianz |
85.29 |
81.96 |
Bharti AXA |
88.55 |
77.50 |
Cholamandalam MS |
35.30 |
40.46 |
HDFC ERGO |
62.29 |
69.01 |
ICICI Lombard |
76.45 |
69.90 |
IFFCO Tokio |
101.92 |
95.66 |
Kotak Mahindra |
47.20 |
49.22 |
Reliance |
93.55 |
89.36 |
Royal Sundaram |
60.52 |
63.55 |
SBI General |
52.03 |
50.54 |
Shriram General |
52.51 |
96.64 |
Tata AIG |
77.89 |
66.61 |
HDFC ERGO Health |
62.59 |
73.69 |
Star Health |
62.73 |
65.91 |
New India |
103.74 |
100.83 |
Edelweiss General |
115.35 |
113.05 |
Acko General |
23.69 |
21.08 |
As discussed earlier, ICR is the ratio between the net claims incurred and net premiums collected. In contrast, Claim Settlement Ratio in health insurance or CSR is the number of claims received, and the number of claims settled in a financial year. You can't use them interchangeably.
ICR has a broader scope compared to CSR. CSR is only concerned with the claim settlement. For example, if an insurance company has a claim settlement ratio of 90%, they have settled 90% of their claims in the year, while the remaining 10%, are either rejected or pending.
Choose health insurance wisely for yourself and your family members. An insurance provider with a good ICR will be trustworthy so that you can trust it for long-term investment.
The ideal ratio for health insurance is between 70% and 90%. It is best to choose an insurer falling in this range when buying health insurance in India.
In simple terms, the incurred claim ratio tells us the insurer’s ability to settle the claims received.
ICR is one of the deciding factors when buying health insurance in India. However, it cannot be the only determining aspect. The affordability of the policy, the claim settlement ratio of the insurer, features, benefits, and exclusions collectively help you decide the right health insurance plan for you and your family.
Yes. Start-up health insurance providers take time to establish their presence in the insurance sector. Therefore, building equity around incurred claim ratio would take time.
The information regarding the Incurred Claim Ratio for different insurers in India is readily available in the annual reports on the IRDAI website.
At the time of choosing a health insurance plan, it is recommended that you pick a trustworthy and reliable company. A higher incurred claim ratio signifies the trustworthiness and financial stability of the company. However, if your company has a low ICR, you always have the option to port out to a different insurer. Weigh all the pros and cons and then make a decision.
No, choosing an insurer with an ICR above 100% is not recommended. In business, these numbers imply loss-making. This incurred claim ratio bandwidth is not sustainable for a company. Even if the company is offering a more affordable premium rate, you may incur trouble at the time of claim settlement.
When the Incurred Claim Ratio of the insurance company is between 50% to 100%, it may be taken as an indication of its financial stability. In most cases, the company would be able to sustain claim settlements.