Sunday, September 24

How is Incurred Claim Ratio Different From Settlement Claim Ratio?

How is Incurred Claim Ratio Different From Settlement Claim Ratio

Health insurance plans are of utmost importance in your life as it safeguards you financially against any uncalled medical emergency. However, understanding the technicalities of these medical insurance plans can be a tricky business. If you have gone through various medical insurance plans, you must be feeling very confused about the technical aspects or trustworthiness of an insurance company. Medical insurance providers often take advantage of this confusion and oversell unintended coverage to unaware customers.

This is the reason why knowing a few things about medical insurance and its elements is necessary. incurred claim ratio (ICR) and claim settlement ratio (CSR) are two of the most important terms that you should be aware of before buying health insurance. However, a lot of people make the mistake of believing that these two are the same elements, which is definitely not the case. In this article, we will shed light on the key differences between claim settlement ratio and incurred claim ratio in health insurance

Claim Settlement Ratio

A claim settlement ratio refers to the ratio of the total number of claims settled by an insurance company against the total number of claims received. For better understanding, let’s take this example. A claim settlement ratio of 95% means that out of 100 claims received, 95 claims have been accepted and settled by the insurance provider. This claim settlement ratio indicates how likely your claim is to get settled by a specific insurer. 

The higher the claim settlement ratio, the better are your chances of getting your claims settled. However, there is also one drawback of the claim settlement ratio. It does not consider the time taken to settle a claim. In other words, the insurer might have a high claim settlement ratio even if it takes months to settle down a claim. You should always make sure to invest in a company with a higher claim settlement ratio.

Incurred Claim Ratio

Incurred claim ratio or ICR is the total amount of claims that are paid by the insurer in ratio to the total amount collected as premiums in a financial year. Let’s understand the same with the help of an example. Suppose the incurred claim ratio of an insurance company is 75%, which means that the insurer is paying ₹75 as the claim payment to every ₹100 collected as a premium. The remaining ₹25 is then considered as the profit made by the insurer.

This incurred claim ratio shows the financial strength of the company and if the company is able to pay for the claims filed by the customers. An incurred claim ratio of more than 100% indicates that the company is paying more amount towards the settlements of the claim as compared to the amount received as premiums. This ratio of more than 100% indicates that the insurer is suffering a financial loss by paying more than what is being received. As a result, the premiums might be hiked or the borderline claims might also get rejected.

If the ICR is between 50% to 100%, it means that they are managing the company’s finances well, making profit and people are also buying policies from the provider. It also indicates that the customers are well aware of the claim process and when to not raise one.

Now, a low incurred claim ratio will indicate a huge profit-making insurance company. In other words, they are paying way lesser than what they are receiving as premiums. This either means that the insurance provider is rejecting more claims or the premiums are high. There is also another possibility of the policyholders not raising any claims as they are healthy but the chances of this happening are rare.

You can check the incurred claim ratio in the annual report of the Insurance Regulatory and Development Authority, IRDAI annual report. IRDAI provides the total incurred claim ratio of the company as well as separate ICR for different types of general insurance. 

Difference Between Incurred Claim Ratio Vs Claim Settlement Ratio

  • The major difference between the two is that incurred claim ratio refers to the ratio of total claims paid and the total premium amount received. On the other hand, claim settlement ratio is the ratio of total claims received and settled.
  • The incurred claim ratio is published in IRDAIs annual report whereas a CSR is usually displayed on the official website of the insurance company.
  • An incurred claim ratio between 75% to 100% is considered ideal. In terms of CSR, the higher the ratio, the better the probability of the claim being settled.
  • The time taken to settle a claim is considered in incurred claim ratio while the same is not considered in CSR.
  • Incurred claim ratio is a better and more reliable indicator of the financial strength of the insurance company as compared to the claim settlement ratio.


People are often lured into buying health insurance without proper research. However, opting for the right health insurance is necessary too. The incurred claim ratio, as well as the claim settlement ratio, are both indicators of that. So make sure you check this information before you purchase health insurance from any insurance provider.

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