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Here’s what you should know about incurred claim ratio before buying health insurance

Here’s what you should know about incurred claim ratio before buying health insurance

The incurred claim ratio or ICR is one of the crucial parameters, apart from CSR, that helps in determining a suitable health insurance plan. ICR implies the ratio between net claims provided by an insurer to net premiums it collected in a financial year. The IRDAI releases the ICR of different health insurance providers each year.

The following sections offer an insight into this concept that can help you, the policy buyers, in making an informed decision.

Importance of knowing the ICR of a health insurance provider

A health insurance policy is highly essential today, considering the rising cost of medical treatments and inflation. You should carefully compare various insurance providers based on their capability to fulfil claims to make an informed decision.

The incurred claim ratio is one of the important factors that can help you assess an insurer’s claim fulfilling abilities. It is a significant indicator of the financial health of a health insurance provider. Therefore, you need to know the ICR of an insurance company before purchasing a health insurance plan.

Let’s take a look at how the ICR can enable you to choose the right health plan:

ICR is below 50%

If the ICR of an insurer is below 50%, it implies the insurer has settled claims between 0% and 50% of all the premiums it got in a particular year. Such low ICR implies the insurer has rejected most of the claims.

It would be wise to avoid a health insurance company that would come with an ICR that is less than 50% for a given year.

ICR ranging from 50% to 100%

An incurred claim ratio in this range implies an insurer settles its claims moderately. Such ICR denotes that the insurer is financially stable enough to settle claims raised by its customers. Make sure to choose a health insurance provider having an ICR between 50% and 100% to enjoy an increased chance of claim settlement.

ICR is over 100%

In case an insurer’s ICR is more than 100%, it means the company has paid more towards claim settlement than it has received as premiums in a given financial year. An ICR exceeding 100% implies that an insurer is fast losing money and that claims can be rejected in the near future. You need to avoid purchasing a medical insurance policy from an insurer with ICR beyond 100%.

Experts suggest that the most appropriate range of ICR for a health insurer lies between 70% and 90%. Such health insurers and their insurance products are beneficial for you.

Calculating Incurred Claim Ratio

The Incurred Claim Ratio is estimated with the following formula:

  • ICR= Net Claims Incurred/ Net Premium Collected

Let’s take an example to have a clear understanding:

The medical insurance company that you are planning to purchase an insurance plan from has an ICR of 87%. This implies for every Rs.100 the insurer gets in the form of premium payments by insured individuals, Rs.87 is spent to settle claims. So, the company gains a profit of Rs.13. However, if the ICR is 100% or more, it shows that this insurance company is financially at a loss.

Nevertheless, if you are planning to purchase an insurance policy, you should compare plans online and learn the details of policies, and make a decision.

It is important to choose a health insurance provider that comes with an appropriate incurred claim ratio to get hassle-free and prompt claim settlement. And, as far as selecting the right insurance coverage is concerned, one should always have a set goal or a budget predetermined before making any decisions.

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