## What is Incurred Claim Ratio in Health Insurance?

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.

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## Understanding ICR

Now, you may have understood the Incurred Claim Ratio meaning. So, let us learn how to depict the Incurred Claim Ratio formula as

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 ICR of 95%. The premium is Rs. 100. The 95% ICR means that the insurance company will use Rs. 95 for settling claims out of every Rs. 100 the company receives as premium payment. Therefore, the profit of the company will be Rs. 5.

## ICR In Health Insurance Company

Here is the list showing Incurred Claim Ratio of health insurance companies in India and their for the year 2020.

 Insurance Company ICR 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%

ICR 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 ICR value and what it denotes.

### 1. Incurred Claim Ratio of Health Insurance Company Is More Than 100%

What if the ICR 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.

### 2. Incurred claim ratio of health insurance company is less than 50%

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.

### 3. Incurred claim ratio of health insurance company is more than 50% and less than 100%

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 ICR is between 70% to 90%.

## Comparison of Private and Standalone Health Insurers w.r.t Incurred Claims Ratio 2017-18

Check out the comparison of the ICR 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

## Things to Consider When Calculating Incurred Claim Ratio

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 ICR 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.

• ### Type of Insurance Products

An insurance company will have different products like health insurance, life insurance, motor insurance, etc. The overall ICR will be an average of them. Hence, keep in mind that the ICR you see may be of the health insurance alone or the overall average.

## Difference Between Incurred Claim Ratio and Claim Settlement Ratio

As discussed earlier, ICR is the ratio between the net claims incurred and net premiums collected. In contrast, Claim Settlement Ratio 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.

## Conclusion

When you have decided to buy a health insurance plan, choose a trustworthy and reliable insurer. Incurred Claim Ratio will help you find the right one since it signifies the trustworthiness and financial stability of the company.

Never choose an insurer with a lower ICR, even if they offer affordable premium rates as you may incur trouble at the time of claim settlement.

You can use Bajaj Markets, a reliable platform where you can find health insurance policies from different partners. You can compare and check the ICR, CSR and premium rates of the company, and the features, benefits, and exclusions of the policy.

## FAQs on Incurred Claim Ratio

### ✔️What is the ideal Incurred Claim Ratio for health insurance?

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.

### ✔️What is the significance of Incurred Claim Ratio in health insurance?

In simple terms, the incurred claim ratio tells us the insurer’s ability to settle the claims received.

### ✔️Should I buy health insurance based on the Incurred Claim Ratio of the insurer?

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, claim settlement ratio of the insurer, features, benefits, and exclusions collectively help you decide the right health insurance plan for you and your family.

### ✔️Does the calculation of ICR depend on the age of the health insurance provider?

Yes. Start-up health insurance providers take time to establish their presence in the insurance sector. Therefore, building equity around ICR would take time.

### ✔️Where can I find the ICR of a health insurance provider?

The information regarding the Incurred Claim Ratio for different insurers in India is readily available in the annual reports on the IRDAI website.