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

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Every year, countless people buy health insurance plans, and countless insurance companies sell them too. Now, there are policyholders who make one or more claims during the policy period, and then there are those who have a claim-free year. The latter is good news for any insurance company. But in the first case, the insurer can approve or reject a claim based on multiple factors. Now, while spending more in claim money can deplete their bank balance, not settling enough claims can hit their credibility in the insurance sector. Essentially, there needs to be a balance between the two, and this is the reason why it becomes vital for you, the customer, to understand the term Incurred Claims Ratio (ICR) and how it affects your decision of buying a policy from a particular insurer.

What is Incurred Claim Ratio or ICR?

Incurred Claim Ratio (ICR) is the ratio of net claims settled by an insurance provider to the net premiums collected in a financial year. The ICR gives an overall picture of the financial health of the company. Experts suggest that when you are planning to buy health insurance plans, look for an insurance provider with a moderate ICR. The Insurance Regulatory and Development Authority of India (IRDAI) publishes the ICR of all general and health insurance companies annually in its annual report. But remember, while the ICR can be one of the important factors to consider while buying a policy, it should not be the sole deciding factor.

How to Calculate Incurred Claim Ratio?

Incurred Claim Ratio = Net Claims Settled/Net Premium Collected. Let’s understand with the help of an example -suppose an insurance company collects INR 10 lakhs in premium and spends INR 9 lakhs on settling claims in a given financial year. Then the ICR of the company will be 90%.

Incurred Claim Ratio – Private, Public and Standalone Health Insurers

The Incurred Claim Ratio of all private, public and standalone health insurance companies of India is published by the IRDAI in its annual report. You can view and download the annual report from the IRDAI website.

What Does Incurred Claim Ratio Indicate?

Basically, Incurred Claim Ratio of an insurance company talks about the financial health of the company. It indicates the capability of the insurer to settle claims. Here’s how the financial performance of the company looks, like based on the ICR:

• If the ICR is more than 100%, it means the insurance company has settled more claims than the premium earned during a financial year. This may be good news for the policyholders, but the company is incurring losses, and there are chances of rejecting claims in future. It’s wise not to buy health insurance from a company whose ICR is greater than 100%.

• If ICR is between 50% - 100%, then the insurance company is financially stable and is making profits. The company can manage to settle claims from the total premiums earned in a year. An insurance provider with 50% - 100% ICR should be good choice as you will not have any issues at the time of claim settlement.

• If ICR is less than 50%, then the company is making profits no doubt, but is rejecting majority of the claims. It is advisable not to buy health insurance from insurance providers whose ICR is less than 50%.

Conclusion

To conclude, when buying health insurance plans, you should consider a lot of parameters and one of them is the Incurred Claim Ratio of the insurance company. Make sure to check the ICR of all health insurance companies published in the annual report of IRDAI and make an informed choice.

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

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