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Incurred Claim Ratio

What is the Ideal Incurred Claim Ratio?

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Health insurance is an emerging sector in India, offering a plethora of health insurance plans. If you are a newbie in health insurance investment, then it becomes overwhelming to choose the right health insurance policy. Coverage, exclusions, premium, and network hospitals are the factors that influence your buying decision. But, amongst them, the incurred claim ratio is the most important factor that you should consider before opting for medical insurance. In this article, you can read about the incurred claim ratio and how it helps you to choose the right health insurance plan.

What is Incurred Claim Ratio?

Incurred Claim Ratio means the ability of a health insurance company to make the payments towards the claims received during the year. IRDA publishes the incurred claim ratio details every year. It is a yardstick that is used to measure the performance of the insurer. Experts opine that the health insurance company with a moderate incurred claim ratio should be an ideal choice for investment, and you can bank upon it for financial security.

Incurred Claim Ratio and Claim Settlement Ratio are two important jargons that are often used in the health insurance segment. It is essential to understand the difference between these two terminologies so that you make the right decision when buying a health insurance policy. Incurred Claim Ratio is a measure of the net claims settled by an insurer in a financial year as against the total premium amount received in the same period. This terminology is often used in the general insurance segment. Again, a higher incurred claim ratio is beneficial for policy buyers. For instance, if the incurred claim ratio for an insurer is above 100%, this implies that for every 100 Rupees collected as premium, the insurer is settling a claim more than 100 Rupees. A lower incurred claim ratio does not necessarily mean a loss. In fact, that could imply that the insurer may be making a profit with higher premium collections.

Incurred Claim Ratio Formula

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

How Incurred Claim Ratio Helps to Choose the Right Health Insurance Plan?

Here you can interpret these below statements to know how ICR can help you to choose the right health insurance plan.

Incurred Claim Ratio Greater than 100%

  • This denotes that the incurred claim ratio is more than 100%. It means that the health insurance claim settlements are higher than the total premium received by the health insurance company.
  • This is a loss-making situation for the insurer, and in the future, there is a threat of claim rejection.
  • Thus, you should not prefer such a health insurance company to invest your hard-earned money.

Incurred Claim Ratio Between 50% to 100%

  • This situation denotes that the incurred claim ratio is between 50% to 100 % and insurer settling claims moderately out of total premium received during the year.
  • This shows that the insurer is financially sound to settle the claim and selling sound and comprehensive medical insurance.
  • Thus, such health insurance company has a bright future, and there are good chances it keeps on honoring your future claim. It is good to go.

Incurred Claim Ratio Less than 50%

  • This condition denotes that the incurred claim ratio is between 0 to 50%, where the health insurance company is settling claims between 0 to 50 % out of total premium received during the year.
  • This is a profit-making situation for the company but not good for you as a policy buyer. This means that the company is rejecting a higher number of claims.
  • Thus, you should avoid such a company, as in the future, there are the chances it pays lower claims even.

Difference between Incurred Claim Ratio and Claim Settlement Ratio

Incurred claim ratio should not be confused with the claim settlement ratio. ICR and CSR are different. The incurred claim ratio is the total amount of claims paid over the total premiums received during the year whereas claim settlement ratio is the number of claims paid over the total claims received by the health insurance company, during the year.

Thus, you should act wisely while selecting health insurance plans for you or for your family. Check the health insurance policies offered by Religare Health Insurance that has a good ICR and trustworthy to invest the money for future security.

What is the Ideal Incurred Claim Ratio?

The ideal Incurred claim ratio lies between 70%-90%, so, you should opt for the health insurance company that has moderate ICR.

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