incurred-claim-ratio-vs-claim-settlement-ratio
By Okbima 12 Apr 2024 7

Incurred Claim Ratio Vs Claim Settlement Ratio: Meaning, Difference & How To Check?

 

When it comes to insurance, understanding Incurred Claim Ratio (ICR) and Claim Settlement Ratio (CSR) is crucial for policyholders. The ICR reflects the percentage of claims paid out by the insurance company against the total premiums collected. Where CSR represents the percentage of claims settled by the insurer out of the total claims received. Let’s understand their meaning, and differences & how you can check.

 

What Is Incurred Claim Ratio in Health Insurance?

The incurred claim ratio (ICR) in health insurance is a key metric that tells you how much of the premium money an insurance company pays out in claims during a specific year. It essentially reflects the balance between the money collected and the money spent on medical expenses. ICR is calculated by dividing the total amount of claims paid by the insurance company by the total amount of premiums collected in a financial year.

Example: Let's say an insurance company collects Rs. 1,00,000 in premiums and pays out Rs. 80,000 in claims during a financial year. Their incurred claim ratio would be:

  • ICR = (Total Claims Paid / Total Premiums Collected) x 100

  • ICR = (Rs. 80,000 / Rs. 1,00,000) x 100 = 80%

In this example, the ICR of 80% indicates that the company pays out Rs. 80 for every Rs. 100 it collects in premiums. The remaining Rs. 20 represents the company's profit and operating expenses.

 

Here's what a certain ICR might indicate:

  • ICR between 70% and 90%: This is considered a healthy range, suggesting a good balance between claim settlements and profitability for the company.

  • ICR below 70%: This could mean the company is charging high premiums compared to claims paid.

  • ICR above 90%: This might indicate the company is paying out a significant portion of its premiums in claims, potentially leading to future premium hikes.

 

How To Check Incurred Claim Ratio Of An Insurance Company?

In India, the Incurred Claim Ratio (ICR) of an insurance company can be checked through various sources, including official websites and reports published by the Insurance Regulatory and Development Authority of India (IRDAI). 

Here are the steps to check the ICR of an insurance company in India:

  • Visit the IRDAI Website: Go to the official website of the Insurance Regulatory and Development Authority of India (IRDAI).

  • Navigate to Reports: Look for a section on the website that provides access to reports. This section may be labeled as "Publications," "Reports," or something similar.

  • Access Annual Reports: Find the section that contains annual reports related to the insurance industry. IRDAI typically publishes annual reports that include comprehensive data on the performance of insurance companies, including their Incurred Claim Ratios.

  • Locate the Desired Report: Look for the most recent annual report published by IRDAI. These reports usually contain detailed information about the financial performance and operational metrics of all insurance companies operating in India.

  • Find the Incurred Claim Ratio Data: Within the annual report, locate the section that specifically deals with performance metrics or financial indicators of insurance companies. The Incurred Claim Ratio data is often presented in tables or charts alongside other key performance indicators.

  • Identify the Insurance Company: Look for the name of the insurance company whose Incurred Claim Ratio you wish to check. The report typically lists the ICR for each insurance company separately.

  • Review the Incurred Claim Ratio: Once you've located the relevant section and the specific insurance company, review the Incurred Claim Ratio data provided. The ratio is usually expressed as a percentage and reflects the insurer's claims management efficiency.

 

Buy Health Insurance With Highest Incurred Claim Ratio: Get A Free Quote

 

What Is The Claim Settlement Ratio in Health Insurance?

The claim settlement ratio (CSR) in health insurance is a metric that indicates the percentage of claims an insurance company approves and pays out to the total number of claims filed by policyholders in a specific period (usually a financial year). It essentially reflects the efficiency of the insurer's claim settlement process. CSR is calculated by dividing the total number of claims settled by the insurance company by the total number of claims received in a year and multiplying by 100.

 

Example: Let's say an insurance company receives 1,000 health insurance claims in a year. Out of these, they approve and settle 920 claims. Their claim settlement ratio for that year would be:

  • CSR = (Total Claims Settled / Total Claims Received) x 100

  • CSR = (920 claims / 1,000 claims) x 100 = 92%

In this example, a CSR of 92% indicates that the company approves and pays out a high proportion (92%) of the claims it receives.

 

Here's what a certain CSR might indicate:

  • CSR above 90%: This is considered a good sign, suggesting the company has a streamlined claim settlement process with a high approval rate.

  • CSR between 80% and 90%: This is still a decent range, but it might be worth comparing it with other companies CSRs.

  • CSR below 80%: This could indicate a more complex or stricter claim settlement process, potentially leading to claim rejections.

 

How To Check The Claim Settlement Ratio Of A Health Insurance Company?

In India, you can check the Claim Settlement Ratio (CSR) of a health insurance company by following the below steps.

  • Visit the IRDAI Website: The Insurance Regulatory and Development Authority of India (IRDAI) regulates insurance companies in India. They publish annual reports that include data on the CSR of all insurance companies operating in India.

  • Navigate to the Annual Reports Section: On the IRDAI website, look for the section that contains annual reports. This information is typically available under the "Publications" or "Reports" tab.

  • Locate the Latest Annual Report: Find and download the most recent annual report published by the IRDAI. These reports usually contain comprehensive data on the performance of insurance companies, including their CSR.

  • Search for the CSR Data: Once you have the annual report, search for the section that provides details on the CSR of health insurance companies. This section may be labeled as "Performance of Insurers" or "Claim Settlement Ratio."

  • Review the Data: Look for the CSR figures of different health insurance companies. The CSR is usually presented as a percentage, indicating the ratio of claims settled to claims received by each insurer.

  • Compare Insurers: Analyze the CSR data to compare the performance of different health insurance companies. A higher CSR generally indicates better claim settlement efficiency and reliability.

 

Buy Health Insurance With Highest Claim Settlement Ratio: Get A Free Quote

 

Difference Between Incurred Claim Ratio And Claim Settlement Ratio

In the below table, we have given a comparison table between the Incurred Claim Ratio, and Claim Settlement Ratio.

 

Aspect

Incurred Claim Ratio (ICR)

Claim Settlement Ratio (CSR)

Definition

The ratio of the total value of claims incurred by an insurer to the total premium collected.

The ratio of the total number of claims settled by an insurer to the total number of claims received.

Calculation

(Total Claims Incurred / Total Premium Collected) x 100%

(Total Claims Settled / Total Claims Received) x 100%

Purpose

Provides insight into the insurer's ability to manage claims efficiently and control costs.

Reflects the insurer's efficiency in settling claims and providing financial protection to policyholders.

Interpretation

A lower ICR indicates better cost management and risk assessment by the insurer.

A higher CSR indicates the insurer's reliability in honoring claims and providing timely settlements.

Impact on Insurers

Helps insurers assess their profitability and financial stability.

Affects the insurer's reputation and trustworthiness among policyholders.

Regulatory Compliance

Regulated by the Insurance Regulatory and Development Authority of India (IRDAI)

Regulated by the Insurance Regulatory and Development Authority of India (IRDAI)

Timeframe

Typically calculated annually.

Typically calculated annually.

Importance for Customers

Customers may use ICR to evaluate insurers' financial health and potential to honor future claims.

Customers often consider CSR as a measure of an insurer's reliability and customer service.

 

Read More:

Tata AIA Claim Settlement Ratio: Tata AIA Life Insurance

Types of Life Insurance: Definition & Benefits in India 2024

Best LIC Investment Plans in India 2024

Best Monthly Income Scheme in India 2024

 

Conclusion

In conclusion, it is important to understand the difference between Incurred Claim Ratio and Claim Settlement Ratio when evaluating an insurance provider's performance. The Incurred Claim Ratio measures the total amount of claims settled by an insurer against the total premium collected. Where the Claim Settlement Ratio is the percentage of claims settled by the insurer out of the total claims received. It is crucial to check both ratios to ensure the financial stability and efficiency of an insurance company. You can contact “Our Experts” to buy the best health insurance plans with a high claim & incurred ratio.

 

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