How to Calculate Incurred Claim Ratio in Health Insurance?

The importance of health insurance has been stressed over and over again and yet the importance cannot be optimally highlighted. The awareness among the common masses has increased as is evident in the rising penetration of health insurance in the market today as compared to a decade ago. With the rising awareness, insurers are offering more and more newer types of health plans to lure the potential buyer towards their products.

Read More

Get ₹5 Lac Health Insurance starts @ ₹200/month*
Tax Benefitup to Rs.75,000
Save up to 12.5%* on 2 Year Payment Plans
7 Lakh+ Happy Customers

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
*Tax benefit is subject to changes in tax laws. Standard T&C Apply

Get insured from the comfort of your home No medicals required
I am a

My name is

My number is

By clicking on ‘View Plans’ you, agreed to our Privacy Policy and Terms of use
Close
Back
I am a

My name is

My number is

Select Age

City Living in

    Popular Cities

    Do you have an existing illness or medical history?

    This helps us find plans that cover your condition and avoid claim rejection

    Get updates on WhatsApp

    What is your existing illness?

    Select all that apply

    When did you recover from Covid-19?

    Some plans are available only after a certain time

    New features, enhanced benefits, specialized health insurance plans have revolutionized the health insurance sector. The common man is spoilt for choice when it comes to buying the best plan for himself. As such experts have developed certain parameters to compare between different insurers and the plans they offer. Comparing the Incurred Claim Ratio is one such yardstick used to measure the performance of an insurer.

     

    Simply stated, Incurred Claim Ratio means the ratio of the net claim settled by the insurer to the net premiums collected in any given year. The formula is:

    Incurred Claim Ratio = Net claims incurred / Net Premiums collected:

    So, suppose company ABC in the year 2018 earns Rs 10 Lakh in premiums and settles total claim of Rs 9 Lakh then the Incurred Claim Ratio will be 90% for the year 2018.

    Significance of the Ratio

    A higher Incurred Claim Ratio is good news for you, the investor or the existing policyholder because it indicates that the company is successfully meeting claims made on it. Therefore, you can put a higher amount of trust on insurers having a high Incurred Claim Ratio.

    From the insurer’s perspective, a higher ratio indicates lower profits. For instance in the above example, a 90% ratio indicates that 90% of the premiums collected or earned in the year are spent towards claim settlements and the balance 10% is the profit margin. If the ratio in 2019 increases to 95%, the profit of the insurer will fall from 10% to 5%, which will be bad from the company’s revenue experience but good for the customer. A ratio higher than 100% indicates that the company is incurring losses because the premium collection is insufficient to pay the claims and so the insurer is probably utilizing its reserves to settle claims which is bad news.

    Points to Consider

    Though the Incurred Claim Ratio is a good yardstick to measure the company’s performance, yet it does not reflect the bigger picture.

    Time taken to settle the claims: For starters, though the ratio measures the claims settled against the collected premiums, it does not take into consideration the time taken to settle the claims. So, the insurer may have a ratio in the range of 90-95% yet, the claim settlement process maybe lengthy taking about 4-6 months and the experience may be hassling for you. So, on one side you, the customer, are wearing off your sandals circling the insurer for claim settlement, and on the other hand, your insurer is delaying the claim, and at the same time, maintaining a good ratio.

    Low earnings initially: A start-up insurer may not have a substantial premium earning in the initial years of operation and the claims experienced may be high. As such, the Incurred Claim Ratio will tend to cross the 100% mark which should not be absolutely interpreted as the insurer making a loss because the initial years may have a higher claim incidence.

    Disclaimer : *Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

    Therefore, while we see Reliance, New India Assurance, Bharti AXA, Apollo Munich and HDFC Ergo has increased their Incurred Claims Ratio significantly, there has been a downward trend in the ratios of Bajaj Allianz, National Assurance, Max Bupa, and United India.

    Over to you!

    Be smart while choosing your health insurance provider because a low ICR will spell trouble for you because what good is your health plan if the claim is not settled promptly. Compare the ratios, look into other factors, such as plan benefits, coverage and premium rate, and buy the best plan for your needs.

    Search
    Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

    Health insurance articles

    Recent Articles
    Popular Articles
    12 Tips to Avoid Common Health Problems During Summers

    12 May 2022

    India experiences a hot and dry summer season that lasts for up to...
    Read more
    Does Medical Insurance Cover Hearing Aids?

    12 May 2022

    The number of people who require hearing aids continues to grow...
    Read more
    Are Accidental Injuries Covered by Health Insurance in India?

    12 May 2022

    Accidents are unpredictable. Getting injured in an accident not...
    Read more
    6 Most Effective Ways to Prevent Viral Fever

    12 May 2022

    A change in weather can bring respite from the scorching summer...
    Read more
    Does Health Insurance Cover Death?

    06 May 2022

    Life is unpredictable and so is death. A lot of people lose their...
    Read more
    PMJAY Scheme: Ayushman Bharat Yojana Eligibility & Registration Online
    Prime Minister Shri Narendra Modi announced the launch of (PMJAY) Ayushman Bharat Yojana in his Independence...
    Read more
    Best Health Insurance Plans in India 2022
    Finding the best health insurance plan from so many different health insurance companies can get confusing for many...
    Read more
    Best Maternity Insurance Plans
    Maternity insurance offers comprehensive coverage for medical expenses incurred during pregnancy, including the cost...
    Read more
    Best Health Insurance Plans for Senior Citizens in 2022
    Considering the increase in medical inflation in India, buying adequate health insurance for your loved ones has...
    Read more
    10 Major Benefits of Ayushman Bharat Yojana
    Pradhan Mantri Jan Arogya Yojana (PM-JAY) is the second component under Ayushman Bharat Scheme. PM Narendra Modi...
    Read more
    top
    Close
    Download the Policybazaar app
    to manage all your insurance needs.
    INSTALL