About Incurred Claim Ratio

Health insurance penetration in India has increased over the years, but it is yet to take off fully. National Sample Survey Office (2016) data revealed that over 80% of the Indian population is not covered under any health scheme. This means that private insurance companies are still only able to reach a minuscule portion of the population. According to the National Health Profile data released in 2018, out of 4,37,457 persons covered under insurance, only 21% were covered by private companies.

However, the best insurance companies in India have not lagged in bringing new products with various features and offering attractive health insurance benefits to entice customers. The market is flooded with a range of such products that fit every size, budget, and need.

There are close to 29 insurance companies in India that offer various health insurance products. Therefore, there must be some sort of benchmark or parameter to evaluate how a company is performing before potential customers apply for a policy online.

An easy way to evaluate a health insurance policy is by comparing it with other health plans online. Many websites offer free comparison tools that use specific parameters to analyse policies. Most people tend to rely on subjective parameters when comparing health insurance plans online. We strongly believe that you should consider objective parameters such as premium payable, coverage offered, the incurred claim ratio, claim settlement ratio, exclusions, etc., as well to make an informed decision.

In this article, we will be discussing the incurred claim ratio (ICR) and how it is different from the claim settlement ratio (CSR). If you are searching for the best medical insurance companies in India, you can start by researching the insurer’s incurred claim ratio.

What is a Claim?

To understand the ICR and CSR, it is essential to know what a claim is. A claim is a formal application sent by the policyholder to the insurer to receive the sum assured/insured amount that is agreed upon in the insurance policy.

What is Incurred Claim Ratio?

The incurred claim ratio (ICR) is the ratio of net claims settled by the insurer to the net premiums collected by the company during any given financial year. The Insurance Regulatory and Development Authority of India (IRDAI) issues the details regarding the ICR of various insurance companies every year.

In simple words, ICR helps people measure the insurance provider’s performance. When looking to purchase a health insurance plan, you should consider choosing an insurer with a good ICR.

How to Calculate Incurred Claim Ratio?

The incurred claim ratio formula is:

Incurred Claim Ratio (ICR) = Net Claims Incurred / Net Premium Collected

To understand the use of the incurred claim ratio formula better, let us consider the following example.

Illustration: Consider that the insurer you are planning to buy health insurance from has an ICR of 90%. Therefore, for every ₹100 the company receives from premium payments made by the policyholders, ₹90 is spent on settling claims. This means that the company earns a profit of ₹10. In case the ICR is 100%, or beyond that, it indicates that the insurer is suffering a loss in the business.

Things to Consider When Calculating Incurred Claim Ratio

Though ICR is an important measure of an insurer’s health and ability to fulfil claims, it is not a sole yardstick to judge an insurance company’s health or capacity. Also, keep the following factors in mind apart from the ICR.

  • Claim Settlement Time

A high incurred claim ratio or even a high claim settlement ratio (CSR) is not a definite yardstick of efficient or prompt customer service. For example, ABC insurance company may have an ICR of 105% but it does not imply that the settlement process is fast and customer-friendly. ABC may be settling more claims than they are collecting premiums, but it’s of no use if they are taking four to six months to settle a single claim.

  • New Entrants

Owing to low premium collections in the initial years, some new entrants in the market may show a significantly high ICR. That is not a cause for alarm because the insurance company may have witnessed a high number of claims in the initial years.

  • Type of Insurance Products

Incurred claim ratio may differ for various types of general insurance policies sold by the company such as health, motor, fire, marine, crops, etc. The total ICR is calculated as an average of these products. Another important factor to consider while buying a health insurance policy is the inclusions and exclusions, such as pre-existing diseases, alternative therapies, diagnostic expenses, etc.

How Does ICR Help Choose the Right Health Insurance Plan?

Here’s how the incurred claim ratio helps you choose the right health insurance plan:

  • ICR greater than 100%

When the incurred claim ratio is greater than 100%, it means that the insurer has higher claim settlements than the total premiums received in the financial year. In business terms, it means that the company is facing losses, and could be rejecting claims soon. Therefore, it is wise not to seek health insurance from an insurer with ICR greater than 100%.

  • ICR between 50% and 100%

When the incurred claim ratio is between 50% and 100%, it means that the insurer can manage the insurance claim settlements through the total premiums received in the year. In other words, the insurer is financially stable. Choosing an insurer with ICR between 50% and 100% will increase your chances of claim settlement and is, hence, the wiser choice.

  • ICR less than 50%

With ICR less than 50%, the insurer is settling claims between 0-50% of the total premiums received in a single year. Here, the company will be making profits but it is not a good situation for the policy buyer. In simple words, the company would be rejecting a majority of claims to have such low ICR. Hence, it is not advisable to buy health insurance from companies with an incurred claim ratio less than 50%.

Incurred Claim Ratio of Health Insurers in India

As per the latest IRDAI annual report, the incurred claim ratio for health insurers in India is as follows:

Health Insurance Provider

Incurred Claim Ratio 2018-19 (in %)

Incurred Claim Ratio 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

Future Generali

73.31

62.52

HDFC Ergo

62.29

69.01

ICICI Lombard

76.45

69.90

IFFCO Tokio

101.92

95.66

Kotak Mahindra

47.20

49.22

Liberty General

81.64

87.78

Magma HDI

90.46

72.87

Raheja QBE

32.87

85.07

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

Universal Sompo

92.19

76.68

HDFC ERGO Health

62.59

73.69

Max Bupa

53.93

53.51

Star Health

62.73

65.91

New India

103.74

100.83

Edelweiss General

115.35

113.05

Go Digit

10.76

51.83

Acko General

23.69

21.08

Difference Between Incurred Claim Ratio and Claim Settlement Ratio

The claim settlement ratio (CSR) is nothing but the number of claims that have been settled by the insurer in a single financial year. However, it does not determine whether the payout was made as the insurer can reject the claim as well.

On the other hand, the incurred claim ratio (ICR) is the percentage of claims that have been paid as well as the outstanding claims at the end of the financial year minus the outstanding claims at the start of the year.

ICR and CSR are different; hence, choose health insurance wisely for yourself and your family members. The insurance provider you select should have a good ICR for it to be a trustworthy, long-term investment.

Wrapping it up!

The importance of having an adequate health insurance plan cannot be undermined. Besides, it is best to buy the policy from a trustworthy and reliable insurer. Choosing an insurer with a lower incurred claim ratio, only because they offer affordable health insurance premium rates, could cause you trouble at the time of claim settlement.

Therefore, it is recommended to compare and check the incurred claim ratio along with the premium rate, claim settlement ratio, as well as the features, benefits, and exclusions of the policy. Based on this review, you can then proceed to buy a health insurance plan that fulfils your needs.

Health insurance plans available on Finserv MARKETS allow you to benefit from features such as cashless claim settlements, reinstatement benefits, hassle-free renewals, and much more. So, don’t wait. Calculate policy cost using our health insurance premium calculator and get adequate coverage for you and your family at Finserv MARKETS right away

Best Health Insurance Plans Available at Finserv MARKETS

FAQs

  • ✔️What is the ideal incurred claim ratio for health insurance?

    The ideal incurred claim 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 incurred claim ratio meaning in health insurance?

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

  • ✔️Should I buy health insurance based on the incurred claim ratio of the insurer?

    Incurred claim ratio is one of the deciding factors people consider 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 incurred claim ratio 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.

  • ✔️How to find the incurred claim ratio 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.

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