incurred claim ratio
Health Insurance

What Is Incurred Claim Ratio in Health Insurance?

Getting a health insurance plan can be extremely helpful in a time of crisis, especially with the rising healthcare costs. Nonetheless, choosing the right insurance provider to secure your future can be challenging. Conducting thorough research can help you make an informed decision with the available information.

Apart from looking into the sum insured, benefits, features, and eligibility criteria of a health insurance plan, you also need to evaluate the insurance provider and their ability to cover your future medical expenses. The incurred claim ratio of the insurance company is an important metric to consider while looking for insurance plans. Learn everything you need to know about it here, including the meaning of the incurred claim ratio (ICR).

What Is Incurred Claim Ratio?

In health insurance, the incurred claim ratio or ICR measures the proportion of health insurance premiums that an insurance company pays out in claims relative to the total premium amount they collected during a specific financial year. For example, if a company has an incurred claim ratio of 78%, it indicates that they spend ₹78,000 on claims for every ₹1,00,000 they collect in premiums within a fiscal year. The remaining ₹22,000 represents the earnings of the insurance company.

A company that has an extremely high ICR may be more selective when processing claims, potentially leading to rejections for borderline claims. Thus, you are advised to consider health insurance from a company that has a healthy ICR, as it indicates a balanced approach to claim settlements.

In some cases, it is possible for an insurance provider to have an extremely high ICR if their policyholders are healthy and don’t raise any claims. However, this is a relatively rare situation, as most policyholders seek healthcare services at some point, and the ICR is influenced by both the number and cost of claims.

How to Calculate Incurred Claim Ratio?

A simple formula is used to calculate the incurred claim ratio of a company:

ICR = [(Total amount paid for claims) ÷ (Total premium received)] × 100

For instance, let's take company 'A' as an example. If the company has received ₹8.5 lakhs in premiums and settled claims worth ₹6.2 lakhs in a year, you can calculate their ICR for that year as follows:

ICRA = (6.2 ÷ 8.5) × 100 = 72.94% (∼73%)

You can easily check the incurred claim ratio of an insurance provider online. The Insurance Regulatory and Development Authority of India (IRDAI) routinely releases the ICR for the companies and various insurance plans offered by these companies on an annual basis.

Significance of Incurred Claim Ratio

The ICR of an insurance provider offers valuable insight into the company’s financial health and its ability to pay claims.

Insurance companies are responsible for providing coverage for their policyholders’ legitimate medical expenses as per the policy agreement. It is normal for an insurance company to receive more money in policy premiums than the amount they pay out in claims. However, due to various factors, the insurance company may pay out more money towards their customers’ claims than they receive in premiums in a particular year, resulting in an ICR exceeding 100%.

When an insurance company has an average ICR of exceeds 100%, it indicates they frequently spend more money on settling their customers’ claims than the premium amount they receive. This can lead to the company incurring losses and potential financial distress in the coming years unless they increase the policy premiums or change policy guidelines to ensure profitability. Since a health insurance policy is a long-term commitment, you are recommended to partner with a company that has a healthy ICR, i.e., more than 50% but less than 100%.

On the other hand, a consistently low ICR (below 50%) indicates that the insurance provider is working on extremely high-profit margins, which either increases the chances of your claims being rejected or you end up paying extremely high premium rates.

Factors Affecting Incurred Claim Ratio

The three primary factors influencing an insurance company's final incurred claim ratio are as follows:

1. Policy Premium Rates

The premium of a policy represents the amount an insurance company receives from its customers in exchange for their services. If the policy premiums are set higher, the company can make a good profit, resulting in a lower ICR. Conversely, if policy premium rates are too low and fail to cover the operational costs, it can lead to an extremely high ICR.

2. Claims Raised in a Fiscal Year

Since the amount of money settled in claims is one of the most important factors considered while calculating the ICR of a company, it plays a significant role. The amount for claim settlements is directly proportional to the number of claims raised. A higher number of claims raised in a fiscal year typically leads to a higher ICR.

3. Policy Guidelines on Claim Settlement

The policy guidelines regarding claim settlement can significantly impact the ICR. If the policy guidelines of a plan are too restrictive, many claims may get rejected, thus lowering the ICR of that insurance company. Conversely, if a company readily approves claim requests, they may end up paying out more money to their customers than they receive in a year, which can result in a higher ICR.

Choosing the Right Health Insurance

A health insurance plan can cover most of your medical expenses and costs for preventative care, providing peace of mind and financial security for you and your family’s future. You can find the right health insurance plan for yourself by doing thorough research as per your individual requirements. Furthermore, you can save money on taxes by investing in a health insurance plan. Using a mediclaim premium calculator, you may also be able to figure out the cost of your desired insurance plan with the ideal coverage for you and your loved ones. Explore the types of health insurance offered by SBI General and find the best fit for your specific medical needs.


Is the incurred claim ratio the same as the claim settlement ratio?

No. Often confused as the same thing, both the claim settlement ratio (CSR) and the incurred claim ratio (ICR) are two different metrics. The ICR measures the proportion of health insurance premiums that an insurance company pays out in claims. The CSR represents the percentage of health insurance claims that an insurance company resolves out of the total number of claims filed.

What is the ideal incurred claim ratio?

It is recommended to choose an insurance provider with an ICR typically between 70% and 90%.

What is the purpose of the incurred claim ratio?

The ICR is used to assess the financial health of an insurance company. A higher ICR, while indicating that the company is settling claims, may also suggest potential financial instability if no significant changes are made to policy plans or premium rates.

What else should I consider in addition to the incurred claim ratio while getting health insurance?

In addition to ICR, it is advised to consider the time a company takes to settle claims and the policy guidelines related to claim approvals.

Is a high incurred claim ratio good?

Not necessarily. A high incurred claim ratio indicates that a company paid more money to settle their customers’ claims than they received as premiums. This can be either due to the poor financial health of the company or other factors explained above.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.

Looking for the right policy?

Manage Your Policies at Fingertips

Avail Your Insurance Benefits on the go with SBI General Mobile App

Download the App Now

qr code
apple play storeplay store