Published on: 07/14/2025
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When it comes to buying health insurance, most of us focus on premiums, coverage limits, and additional benefits. But there’s one crucial factor that can make or break your experience as a policyholder: the Health Insurance Claim Ratio.
Let’s face it insurance isn’t just about signing papers and paying premiums. It’s about knowing that when life throws a curveball, your insurer will stand by you. That’s exactly where understanding claim ratios like the Incurred Claim Ratio (ICR) becomes essential.
In this blog, we break down what the Health Insurance Claim Ratio really is, why it’s vital, how it differs from the Claim Settlement Ratio, and how to use this information to choose the right insurance provider.
Let’s start with the basics.
The Health Insurance Claim Ratio refers to how an insurance company handles claims made by its policyholders. It gives insights into how often claims are paid, how much is paid, and how quickly. One of the most widely used metrics to assess this is the Incurred Claim Ratio (ICR).
Here’s a quick formula to help you understand ICR:
ICR = (Net claims paid / Net premiums collected) x 100
So, if an insurer collects ₹100 crore in premiums and pays out ₹85 crore in claims, the ICR is 85%.
This ratio helps determine how much of the premium pool is being used to pay policyholders offering a glimpse into both the efficiency and financial health of an insurer.
Now that we know what it is, let’s dig deeper.
The Incurred Claim Ratio gives a snapshot of how much of the premium an insurer actually spends on claim settlements. This figure is published annually by the Insurance Regulatory and Development Authority of India (IRDAI) and is available for public viewing.
So, what is an ideal incurred claim ratio?
Experts often suggest a healthy range lies between 70% and 90%.
Here’s why:
Less than 70% ICR: This could mean the insurer is collecting a lot of premiums but rejecting or underpaying claims. It raises questions about the company’s leniency and trustworthiness.
More than 100% ICR: This suggests that the insurer is paying out more in claims than it earns from premiums. While that may sound generous, it can actually hint at poor financial sustainability, meaning the insurer might struggle to fulfill future claims.
In simple terms too low may mean stingy payouts, and too high may suggest financial instability.
Let’s say you’ve purchased a policy from a company with very low premiums and flashy benefits. Sounds like a great deal, right? But when it comes time to claim, your application is either rejected or delayed endlessly. That’s a nightmare no one wants to experience.
This is where ICR becomes your shield.
A sustainable ICR indicates that the insurance company is not only paying claims but also managing its finances responsibly. Here’s why that matters:
Too high an ICR (>100%): Indicates that the insurer may be under financial stress, paying more in claims than it earns. Over time, this could lead to delayed claim settlements or even denial of large claims.
Too low an ICR (<50%): Suggests the insurer is extremely conservative in approving claims which could mean your chances of a successful payout are slim.
Just like a company’s profit & loss statement reveals its business health, the ICR reflects the insurer’s ability to fulfill its promise providing coverage when you need it.
While both Claim Settlement Ratio (CSR) and Incurred Claim Ratio (ICR) offer valuable insights into the insurer’s claim-handling process, they measure different aspects of the insurer’s operations.
The Claim Settlement Ratio (CSR) is the percentage of claims that the insurer settles out of the total claims it receives. A high CSR (typically above 95%) means the insurer is generally good at resolving claims quickly and efficiently. This ratio is often used by policyholders as a quick way to gauge the insurer’s reliability when it comes to processing claims.
The Incurred Claim Ratio (ICR), however, tells you how much of the insurer’s collected premiums are being used to pay out claims. This metric provides a broader view of how well the insurer is balancing its revenue with its obligations.
While the CSR indicates the insurer’s claim settlement efficiency, the ICR tells you about its overall financial health. A well-rounded evaluation should take into account both the ICR and CSR of an insurer to get a clearer picture of its ability to meet claims while remaining financially sustainable.
Evaluating health insurers based on claim ratios is a critical step in choosing the right insurer. Here are some tips for assessing insurers:
Start by looking at the ICR and CSR of different insurers. Ideally, you want to look for an insurer with a good ICR (above 70%) and a high CSR (above 95%). This combination indicates that the insurer is paying out a reasonable portion of its premiums while successfully settling claims.
Most insurers publish annual reports or claim settlement ratios on their websites or through the Insurance Regulatory and Development Authority of India (IRDAI). These reports provide transparency into the insurer’s financial performance and claim settlement history.
While ratios provide numerical insights, customer feedback offers valuable subjective insights into how the insurer handles claims. Look for reviews and testimonials from policyholders who have filed claims. Are there complaints about delays or denials of claims? This can be a red flag, even if the insurer has a high CSR.
The solvency ratio indicates an insurer’s ability to meet its long-term financial obligations. A higher solvency ratio means the insurer has more reserves to pay claims. Ensure the insurer has a strong solvency ratio in addition to a good ICR.
Finally, check the insurer’s track record over multiple years. Insurers with a consistent performance over the years, in terms of both ICR and CSR, are generally more reliable. A sudden change in the ICR could indicate financial instability, so it’s essential to evaluate long-term trends.
Choosing the right health insurance provider isn’t just about low premiums or broad coverage. Two key indicators of an insurer’s reliability are the Incurred Claim Ratio (ICR) and Claim Settlement Ratio (CSR).
While ICR shows how much of the collected premiums are paid out as claims, CSR reflects how efficiently those claims are settled. Together, they offer a clear picture of the insurer’s trustworthiness and insurance company financial health.
For a smart choice, look for an insurer with a healthy ICR, high CSR, good solvency, and strong customer reviews. Don’t just pick the cheapest policy choose one that’s dependable when it truly matters.
Because it reveals how likely an insurer is to honor your claims and how financially stable they are in the long run.
A very high ICR (>100%) may mean financial instability; a very low ICR (<70%) may suggest strict or fewer claim payouts.
Look at both ICR and CSR, check IRDAI reports, and compare 3–5 year trends to identify reliable and financially sound insurers.
