# What is Incurred Claim Ratio in Health Insurance Plans?

What is Incurred Claim Ratio in Health Insurance Plans?

One of the key parameters in selecting health insurance plans is Incurred Claim Ratio (ICR). In simple terms, it is the ratio of net claims paid by the health insurance company against the net premiums earned during that specific year. If you are planning to take a good health insurance plan, incurred claims ratio of health insurers can influence your decision to some extent. What is Incurred Claims Ratio (ICR)? What are Latest Incurred Claim Ratio (ICR) Health Insurance Companies for FY2017-18? How to interpret ICR while making decisions to buy a health insurance plan in India?

What is Incurred Claim Ratio (ICR)?

Incurred Claims Ratio is the overall value of all claims paid by the insurance company over the total premiums received during the same period. ICR is calculated every year. IRDA publishes the ICR details every year in their yearly insurance report. ICR data are published only for health insurance companies.

Here is the Incurred Claim Ratio formula:

Total value of claims paid during the year / Total Net Premiums received during the year

How to interpret ICR while making decisions to buy a health insurance plan in India?

ICR means, health insurance company’s ability to make payments towards claims received during the year. Let us look at how ICR calculation can be interpreted.

a) Incurred Claim Ratio > 100%

This means that the insurance company is making health insurance settlements higher than the total premiums received by the company.

This means company is loss making.

The health insurance policy might be more flexible, hence insurance company is able to make to settle more claims.

In future, there are higher chances that insurance company starts rejecting claims.  This could be dangerous if you are planning to take health insurance plans for such health companies.

b) Incurred Claim Ratio 50% to 100%

This means that the insurance company is making health insurance settlements between 50% to 100% of total premiums received by the company during that year.

This means a company is making profits also able to make claim settlements.

The company is selling qualified health insurance policy.

In future, there are good chances that insurance company keeps honoring the claims in the same way, that is indicated in the health insurance policy document.

c) Incurred Claim Ratio <50%

This means that the insurance company is making health insurance settlements between 0% to 50% of total premiums received by the company during that year.

This means a company is making good profits and might be rejecting majority of the claims.

The company could be selling health insurance policy that is hard for anyone to claim.

In future, there are higher chances that insurance company keeps paying lower claims in the same way. Even this could turn to be worse if you are planning to take a health insurance plan from such insurance companies.

Where does Incurred Claim Ratio (ICR) interpretation can go wrong?

There are few cases where ICR data can give wrong picture.

1) Time taken for settlement claims – If the time taken for settling claims is high (e.g. It might take 1 month to 6 month period for claim settlement), ICR can show low in that year as it is settled in the next year.

2) New Health Insurance Company’s low earnings – If the heath insurance company is new, it might want to gain reputation and could be more flexible in a health insurance plan and settle most of the claims. In such case ICR would show very high.

3) Established health insurance companies can have sophisticated plan: In such case the claims could be done only based on the parameters within the limits specified in the health insurance policy document and ICR could be low.

4) In Specific instances ICR could be high: If there are heavy floods or earthquakes in specific cities in India, settlements could be high and ICR would be high.

One should review and consider these parameters while choosing a good health insurance plan.

Incurred Claim Ratio vs Claim Settlement Ratio – What is the difference?

Many of us would get confused between these two. Here are the differences between these two ratios.

1) Incurred Settlement Ratio is the total amount of claims paid over the total premiums received during the period. Claim Settlement Ratio is the claims paid over the total claims received.

2) ICR can be more than 0% and even more than 100%. There is no definitive number. However Claim Settlement Ratio would be between 1% to 100%.

3) ICR ideal ratio could be 70% to 90%. However, in case of Claim Settlement Ratio the higher could be better. Higher Claim Settlement Ratio could help you to choose a right term insurance plan.

What is the latest Incurred Claim Ratio (ICR) in 2019 of health insurers?

Every year IRDA publishes Incurred Claim Ratio in their annual report, which is published during January/February pertaining to the previous year. Currently they have published it for FY2017-18. Here are the Latest ICR details of health insurers available now in 2019.

What is the ideal Incurred Claim Ratio to be considered while buying Health Insurance Plans?

One would get doubt whether Incurred Claim Ratio should be high or low. There are no standard guidelines on what should be the ideal ICR. However, one can consider ICR of 70% to 90% as an ideal which indicates that company is able to honor majority of the claims and also making some profits in a year.

Suresh KP

What is Incurred Claim Ratio in Health Insurance Plans

• GOPAL GUPTA

Why Max life term Insurance not in the chart

• Ganesan

Thanks for the Article.

• Thank you Ganesan

• R Ramakrishna

Quite useful.I will certainly look out for companies maintaining an ICR of 60-70%

• thank you ramakrishna