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IRDAI Incurred Claims Ratio (ICR) of Health Insurance Companies in India

Team AckoApr 30, 2024

Prospective and existing policyholders can find it cumbersome to navigate their way out of the complex maze of health insurance jargon. This is where digital health insurance steps in. They are making health insurance a lot simpler and accessible for the general public. Slowly and steadily things are changing. However, educating yourself with basic terminology will always be handy while making an informed decision while choosing the right policy and a suitable insurer.

It is suggested to research an insurance company’s service quotient, social medial reviews, and Claim Settlement Ratio (CSR) before making a purchase decision. People also speak with friends and family, and compare health policies online to find the best deal. But there’s one more parameter that is often not looked at – the Incurred Claims Ratio (ICR).

Read ahead to know what Incurred Claims Ratio means and the difference between Incurred Claim Ratio and Claim Settlement Ratio.




What is the Incurred Claim Ratio or ICR?

Incurred Claim Ratio of an insurance company is about the relationship between claims paid and premium received by them. The ratio is of net claims and net premium on an annual basis.

How to Calculate Incurred Claim Ratio?

The formula to calculate this Incurred Claim Ratio is as follows:

Annual ICR = Net claims of an insurance company/Net premium earned by an insurance company x 100

Incurred Claims Ratio – Private, Public and Standalone Health Insurers:

The Insurance Regulatory and Development Authority of India (IRDAI), which is the apex organization related to insurance, mentions the Incurred Claim Ratios of all Indian insurers in its annual report. Such annual reports can be viewed and downloaded from IRDAI website.

The reports contain information about private insurance companies, public insurance companies as well as standalone health insurance companies. The Incurred Claims Ratio is mentioned as a percentage.

What Does Incurred Claim Ratio Indicate?

The Incurred Claim Ratio can be used to identify the financial health of an insurance company. Such a ratio denotes a health insurance company’s ability to settle the claims raised against them. Therefore, if the ratio is not favourable, the financial health of the company is in a bad condition. They might increase the premium, change the features of the products and maintain strict underwriting processes to get back on track.

Alternatively, a favourable ratio means the company is in good shape. Read ahead to know what different percentages mean with respect to the financial health of the health insurance company.

1) Incurred Claim Ratio of Health Insurance company is more than 100%:

This is not a good situation for the insurance company. Such a ratio states that the insurance company has spent more money on settling claims than it received as insurance premium. Going by numbers, this is a loss-making situation. Being in this band is not sustainable for the insurance company. They need to take drastic steps to change things around. This points to making changes in the product and rejecting claims which are on the borderline.

2) Incurred Claim Ratio of Health Insurance company is less than 50%:

Such a situation might be highly beneficial for the insurance company but not productive for the policyholders. An Incurred Claim Ratio of less than 50% means that the company has a lot more premium as compared to the claims it has been paying out. Policyholders need to be paid the claim amount in a transparent manner. Incurred Claim Ratio of less than 50% highlights that the cost of the policy is on the higher side and it has a lot of exceptions because of which the policyholders’ claims are being rejected.

3) Incurred Claim Ratio of Health Insurance company is more than 50% and less than 100%:

This is the most likely bracket to be in out of the three. Such a scenario is better for the health insurance company and the policyholders as well. This means that the insurance policy is priced properly and has the right features. The exceptions are also not too stringent. There is enough transparency and overall the policyholders are happy with the claim settlement process. The ideal range of the Incurred Claim Ratio can be between 70% to 90%.

Incurred Claims Ratio and Claim Settlement Ratio:

As mentioned above, the Incurred Claims Ratio is about the relation between net premium and net claims. A Claim Settlement Ratio is the relation between the number of claims received and the number of claims settled. For example, if an insurance company has a health insurance claim ratio of 99%, it means that they have settled 99% of their claims in the year while the rest 1% are either rejected or pending.

Incurred Claim Ratio and Claim Settlement Ratio of health insurance companies shouldn’t be used interchangeably. Incurred Claim Ratio has a wider scope compared to the health insurance Claim Settlement Ratio, which is only concerned with claim settlement.

Also, read: 6 Things to Consider Before Filing Your Health Insurance Claim

How to Buy the Best Health Insurance Policy?

One person might be healthy while the other might have some health issues. Every person is different, and so are the health requirements. Therefore, there can’t be one health insurance policy that can be termed as best for all. Here’s a list of important points that will help you to buy the best health insurance policy for you.

Analyse Health Requirements:

One must choose what’s best based on individual health requirements. Thus, the first step is to assess your own health quotient, family history, and lifestyle choices and then lookout for a health insurance policy.

Digital Insurer:

Digital insurers offer a lot of transparency and convenience while buying a policy as well as during claim settlement. Checkout plans offered by new digital insurance companies before shortlisting your options as they might come at a lesser premium.

Compare Plans:

Do not forget to compare features, inclusions, and premium charged for the policy before buying health insurance. Also, keep the brand value of the company in mind while comparing.

Check Reviews:

Seek the opinion of friends and family members regarding the health insurance policy and the provider. You can also check online reviews and testimonials to get an idea about the company’s claim settlement process.

View Ratios:

You can check the Incurred Claim Ratio of general insurance companies in IRDAI’s annual report.

Things to Consider While Calculating ICR (Incurred Claim Ratio)

ICR may be a good judge, but it doesn’t give you accurate information about the performance of the company. Here are a few things to consider:

  1. Time taken to settle claims: ICR only takes into account the claims settled, it doesn’t consider the time taken to settle a claim. The insurance company may claim a settlement ratio of 90-95% but the time taken to settle these claims can be over six months; making it a harrowing experience for the customer. 

  2. Low earnings: Startups usually earn a lot of money via premiums in the first few years of operation which directly translates into a high settlement experience. Consequently, they can report a settlement ratio of over 100% - this means the insurer has been incurring losses due to the high claim incidence in the initial years.

Also, read: Health insurance for family

Frequently Asked Questions:

Is Incurred Claim Ratio a good parameter to gauge the financial strength of a health insurance company?


Yes, an Incurred Claim Ratio can be a good parameter to understand the financial strength of a health insurance company.

Should I base my decision to buy a health insurance policy based on the insurance company’s Incurred Claim Ratio?


The Incurred Claim Ratio can be used as a guideline. It shouldn’t be used as a sole determinant of the health insurance policy’s feasibility.

How can I find out the Incurred Claim Ratio of health insurance companies?


You can find out about different insurers’ Incurred Claim Ratio by checking their annual reports on IRDAI’s website.

Does the age of the insurance company affect its Incurred Claim Ratio?


The age of a new insurance company can affect its Incurred Claim Ratio as a new company might take time to gather premium as compared to an already established company.

The Incurred Claim Ratio is calculated for which type of insurance companies?


The Incurred Claim Ratio is calculated for private, public as well as standalone insurance companies.

Insurance Regulator Warns Public Against Fraudulent Offers on Policies


– July 28, 2020

In a recent circular from the Insurance Regulatory and Development Authority of India (IRDAI) raised the issue of unsolicited calls and fraudulent offers. The regulator said that it has received several complaints about unscrupulous and un-identified calls representing the IRDAI about offers which are beyond the scope of insurance plans. It further added that the callers offered unrealistic benefits by purchasing life insurance policies subject to an advance payment to the account specified by the unidentified callers. The insurance regulator said that it does not offer insurance policies directly nor does it invest the premium received or offer any bonus for insurers or policyholders. It reiterated that policyholders must be vigilant and fall for such unsolicited calls and urged to remain cautious against such frauds or scams. It asked customers to verify the details of the call and the public must deal directly with the insurance company before buying any insurance policy.

IRDAI Appoints Panel to Discuss Drone-related Insurance Policies


– June 29, 2020

Drones are among the high-growth technological innovations and are being considered to meet varied requirements. In June 2020, the Civil Aviation Ministry proposed in the draft rules that manufacturing or importing entities can engage in the sale of such devices only to the entity that is approved by the Directorate General of Civil Aviation. Now, the Insurance Regulatory and Development Authority of India (IRDAI) has set up a panel to discuss insurance products that can cover risks associated with drones.The apex insurance body has asked the appointed panel to analyse the insurance requirements of titleholders and operators of Remotely Piloted Aircraft System (RPAS). Recommendations concerning Third-party Liability are also being sought. The recommendations are not only restricted to the above-mentioned points but also involve underwriting, reinsurance, and other relevant topics. The nine-member appointed panel is expected to submit their report within a timeframe of six weeks.

Insurance Regulator Issued Guidelines to Insurance Companies on Cyclone Amphan Claims


– May 27, 2020

In a circular by the Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines to life insurance companies regarding claim settlements by Cyclone Amphan victims. The IRDAI said that with the devastation of the deadly cyclone, there have been losses of human lives and belongings in the affected districts of Odisha and West Bengal. The guidelines state that the respective state should nominate a senior level officer who should work with the state administration to identify policyholders of those who are diseased due to the cyclone. As for the registration of all reported claims are done immediately and eligible claims to be settled immediately. For claims related to loss of lives and it is difficult to get a death certificate because of non-recovery of the body, etc., the model of Chennai floods 2015 should be adhered to. Details of special camps or offices set up may be publicised through electronic media, press, etc. Also, the IRDAI urged insurance providers to educate and encourage the use of e-modes. And, if any claimants or policyholders walk into the office of the insurance company, then the insurance company should follow the guidelines on Social Distancing and Sanitization of the premises regularly.

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Disclaimer: *Except for exclusions like maternity benefits, undisclosed diseases, etc. Please check policy wordings for more details.
**The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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