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Health insurance is an emerging sector in India. A plethora of health insurance plans is available for customers. If you are a newbie in health insurance investment, choosing the right health insurance policy becomes overwhelming. Coverage, exclusions, premium, network hospitals, COVID-19 coverage, etc., are several factors that influence your buying decision. However, the incurred claim ratio is the most crucial one you should consider before opting for medical insurance. Here, you can read incurred claim ratio meaning and how it helps in your buying decision.
Incurred Claim Ratio (ICR) or Claim Incurred Ratio refers to the proportion of claims paid by a health insurance company against the total amount of premium received during a financial year. IRDAI publishes the incurred claim ratio details every year. It's calculated by the total value of claims paid by the insurance company divided by the amount of premium collected in a financial year. It is a yardstick used to measure the performance of any health insurance company. Experts opine that a company with a moderate incurred claim ratio should be an ideal choice for investment, and you can bank upon it for financial security.
Therefore, it is good to understand incurred claim ratio meaning and its significance if you are looking for a health insurance plan. Comparison of ICRs gives you the correct picture of how the health insurance companies are performing and how prompt they are in settling claims.
ICR is helpful to identify the financial health of the health insurance companies. For instance, if the incurred claim ratio for an insurer is above 100%, this implies that for every 100 Rupees collected as a premium, the insurer is settling a claim of more than 100 Rupees. However, 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. Let's check its simple formula:
Incurred Claim Ratio (ICR) = Net Claims Incurred/Net Premium Collected
ICR can be one of the deciding factors while choosing a health policy. But your decision should not be based solely on it. Few things to consider are:
Claim Settlement Time:
At times it happens, that health insurance companies manipulate ICR by delaying the settlement of insurance claims. Their ICR may be in the range of 75 %- 85 %, but they may take months to settle the claims. Customers will get the claim settlement in the same financial year, but it can be delayed.
Not a Good for Start-Ups:
Start-ups in the health insurance sector may take time to earn a hefty premium. There is a possibility that the amount paid out as settlements can exceed the amount received as a premium. That results, 100% or above ICR, which does not provide an accurate picture to the customers. However, the incurred claim ratio formula is simple, yet it does not provide pictures to the customers accurately.
Here you can interpret these below statements to know how incurred claim ratio of the health insurance companies can help you to choose the right health insurance plan.
Incurred Claim Ratio Greater than 100%
Incurred Claim Ratio Between 50% to 100%
Incurred Claim Ratio Less than 50%
Do not get confused between Incurred Claim Ratio and Claim Settlement Ratio (CSR). These are two different yet necessary jargon often used in the health insurance segment. It is essential to understand the difference between these two terminologies to make an informed decision. The incurred claim ratio of the health insurance companies is the total amount of claims paid over the total premium received during the year. Simultaneously, the claim settlement ratio is the number of claims paid over the total claims received by the health insurance company during the year. Opt for the company with an average ICR but with higher CSR to stay in a win-win situation.
The ideal Incurred claim ratio lies between 70%-90%, so, you should opt for the health insurance company like us with moderate ICR.
There is a high possibility that, as a customer, you can be stuck in a doubtful situation when it comes to choosing a trustworthy health insurance provider. But do not worry! As our name indicates, we care about your hard-earned money and health. We have 55% ICR, which means your money will be in safe hands. Our ICR metrics indicate that we are working moderately on settling the claims per year and have a list of happy and satisfied customers. So, as now incurred claim ratio meaning is clear, you can consider it while opting for a health insurance plan to stay safe and protected.
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The incurred claim ratio shows the health insurance company's ability to settle the claim.
Yes, you can use it as one of the parameters to check the company's financial ability. However, your decision should not be based on it entirely.
As per incurred claim ratio formula, the ideal incurred claim ratio lies between 70%-90%, so you should opt for a health insurance company like us with moderate ICR.
You can use it as one of the deciding factors, but you should consider other crucial aspects of the policy as well that are equally important.
Yes, because a start-up takes time to collect a premium than an already established company comparatively.
^^Number of Cashless Healthcare Providers till 25th March 2022.
^Annual premium for product 'Care' and 'Care Shield (add on)' is Rs. 6160/-(excl. GST) for 1 adult falling under the age bracket 05-24 years, 1 Adult 18-24 age group 3 Yr with NCB Super (Add-on).
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