Incurred Claim Ratio and Claim Settlement Ratio – What’s the difference?

Posted on: Nov 11, 2021 | | Written by:

Incurred Claim Ratio and Claim Settlement Ratio – What’s the difference?

Published on November 11, 2021. EST READ TIME: 3 minutes

Incurred Claim Ratio Vs Claim Settlement Ratio

When it comes to choosing the right health insurance company, it’s essential to consider the insurer’s track record in claim settlement and financial stability. Two important metrics that can help in knowing about the insurance company’s credibility and financial stability are the Incurred Claim Ratio (ICR) and Claim Settlement Ratio (CSR). But what’s the key difference between Incurred Claim Ratio and Claim Settlement Ratio, and where to check these two ratios? Let’s delve into the world of insurance metrics and explore the significance of ICR and CSR in assessing the credibility of health insurance providers.

What is Incurred Claim Ratio or ICR?

Incurred Claim Ratio, or ICR, of an insurance company is an indicator of the company’s financial health. The ICR also helps assess the capability of the company in settling claims. It is the ratio of total claims that an insurance company has settled against the total premiums received by the provider in a year. For example, suppose the premium collected by an insurance company, ABC, in a financial year was Rs 10 lakh, and it settled claims amounting to Rs 8 lakh. So, the ICR of the company is 80%. The formula to calculate ICR is (Net claims settled/net premium) *100.

A company with a high ICR indicates that it is successfully paying out most of the claims, but the flip side is that it is incurring losses as it is spending a huge amount in settling claims. Experts say an insurance company with a moderate ICR is the ideal option.

Where to Check the Incurred Claim Ratio of an Insurance Company?

The ICR of all insurance companies is published in the annual report of the Insurance Regulatory and Development Authority of India, or IRDAI. The annual report can be viewed and downloaded from the IRDAI website.

What is Claim Settlement Ratio (CSR)?

While buying an insurance policy, one of the important factors we look for is the reliability and commitment of the insurance company in settling claims. Will my claims be settled seamlessly? Do I have to run around to get the claims settled? The answer lies in the company’s Claim Settlement Ratio or CSR. The CSR is the percentage of claims an insurance company settles against the number of claims received in a year. The higher the CSR, the more reliable the company is. For instance, if the CSR of an insurance company is 95%, it means, out of every 100 claims received, the company has settled 95 claims.

The formula to calculate CSR: (Total claims settled/total claims received) *100

Where to Check the Claim Settlement Ratio of a Health Insurance Company?

The CSR of different insurance companies is published on the website of the respective insurance providers.

Difference between ICR and CSR

Let’s look at the difference between Incurred Claim Ratio and Claim Settlement Ratio:

Categories	Incurred Claim Ratio (ICR)	Claim Settlement Ratio (CSR)
Meaning	The ratio of total claims settled by the insurer to total premium collected	The ratio of total claims settled to total claims filed
Publisher	IRDAI published ICR in its annual report	Published by the insurance companies on their respective websites
Ratio	ICR of 70 to 90% is ideal	The higher the CSR, the higher the chances of claim settlement
Specificity	ICR is specific to health insurance claims	CSR is for the entire company and all its products

Conclusion

The Incurred Claim Ratio and Claim Settlement Ratio are indicators of the financial health of an insurance company. Before buying health insurance policies or critical illness insurance, it is advisable to check and compare incurred claim ratio vs claim settlement ratio of different insurance providers. While the ICR is published in the IRDAI’s annual report, you can check the CSR from the respective insurance company’s website.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

*International Diabetes Federation Diabetes Atlas

How Claims Work for Health Insurance ?

Why Claim Settlement Ratio Matters to You ?

How important is claim settlement ratio while choosing a health insurance policy?

Incurred Claims Ratio (ICR) in Health Insurance – Know All About It

Can We Claim Health Insurance from Two Companies?