Incurred Claims Ratio (ICR) in Health Insurance – Know All About It

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Incurred Claims Ratio (ICR) in Health Insurance – Know All About It

When investing in health insurance, insurance seekers must analyse the performance of the insurance company.

Fortunately, certain parameters can aid comparison between different insurance providers and their financial offerings.

Generally, insurance seekers look for the best claim settlement ratio in health insurance. However, in addition to the claim settlement ratio, there are other metrics. The incurred claim ratio is one such yardstick that is used to analyse the performance of the insurance company.

Incurred Claim Ratio Meaning

The ICR full form in insurance is incurred claim ratio. Essentially, ICR is the ratio of the net claims payments to net premiums collected in one financial year. It shows how speedily an insurance company resolves its claims.

The Insurance Regulatory and Development Authority of India (IRDAI) publishes an annual report with ICR information for all general and health insurance companies.

Calculating Incurred Claim Ratio

The incurred claim ratio formula is dividing the total number of resolved claims by the premiums collected within one fiscal year. In other words, ICR = Net Claims Settled/Net Premium Collected.

The incurred claim ratio formula is better understood with an example:

Imagine that in one financial year, an insurance provider:

  • Receives ₹20 Lakhs in Premiums and

  • Spends ₹19 Lakhs on resolving claims

Then, with our formula:

  • ICR = (₹19 Lakhs/₹20 Lakhs) x 100

Therefore, the company's ICR for that year will be 95%.

Importance of Incurred Claim Ratio

The ICR can be used as a metric to analyse the financial standing of an insurance company. An unfavourable ratio might suggest poor financial health. As a result, insurance providers could increase their premium amount, adjust certain elements of their offerings, and maintain stringent screening processes to get back on track.

Using this tool, insurance seekers can gauge how quickly the insurance company settles claims that are raised by their customers by computing the ICR percentage.

Factors to Consider When Calculating Incurred Claim Ratio

When checking the ICR of an insurance provider, insurance seekers must consider the following criteria:

Duration of claim settlement: Before investing in a medical insurance plan, insurance seekers must inquire about the time that it takes for the chosen insurance company to settle their claims.

Even if the ICR is high, insurance companies could take more than six months to process claims, which is not an ideal scenario.

New participants: As the ICR metric is a ratio, a lower denominator could result in a higher quotient value. A higher ICR in this situation could be indicative of the company being a new insurance provider in the market and having collected fewer premiums in their former years.

Conversely, if they have seen many claims raised in their former years, there would be no reason for worry.

Types of insurance offerings: An enterprise that offers insurance products may provide a variety of services, including health, life, and auto insurance. The overall claim ratio is an average of all of these.

What Does the Incurred Claim Ratio Indicate?

Let’s understand what the varying percentages reveal about the financial standing of the insurance provider:

ICR is more than 100%

ICR over 100% does not show the insurance company in a positive light as it implies that the insurance provider has paid more money in settling claims than it has received insurance premiums.

It indicates:

The insurer cannot sustain their business in the long run because they are incurring losses

To rectify the numbers, the insurer may have to increase premiums or reduce benefits

The insurer may have poor risk management practices or underwriting that results in higher claims

ICR is less than 50%

This situation is beneficial for the insurance company but not for the policyholders. Less than 50% ICR shows that that insurance provider has received a lot more in premiums than it has paid in claims. Ideally, the claim should be transparently paid to insurance holders.

It indicates:

The insurance provider is not only financially stable but also profitable

The insurance provider either offers lower benefits or has priced its products higher than the market average

The insurance provider has a complicated claim settlement process that discourages or delays insurance holders from raising claims

ICR is More Than 50% and Less Than 100%

This is the most favourable and likely scenario that benefits both the insurance provider as well as the policyholder. Therefore, the ICR should fall between 70% and 90%.

It indicates:

The insurance offerings are appropriately priced and offer the necessary features

The claim settlement is regarded favourably by insurance holders, and the execution is not overly stringent

Wrapping Up

In light of the increasing cost of healthcare, a medical insurance plan is a crucial financial investment for everyone. There are many benefits of health insurance, including a reliable financial safety net in medical emergencies, tax benefits, and mental peace.

However, individuals must carefully analyse the policy as well as the insurance company before they buy health insurance online. In addition to looking for the best claim settlement ratio in health insurance, insurance seekers should also check the ICR of the insurance company for an appropriate analysis.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

Related Articles

How Does the Incurred Claim Ratio Differ From the Claim Settlement Ratio in Evaluating Health Insurance Companies?

How Does the Incurred Claim Ratio Differ From the Claim Settlement Ratio in Evaluating Health Insurance Companies?


While both ICR and Claim Settlement Ratio are important metrics, they serve different purposes. The Claim Settlement Ratio measures the percentage of insurance claims settled by the company out of the total claims received. In contrast, the ICR focuses on the financial aspect, comparing the total amount paid in claims to the total premiums collected. Understanding the difference helps policyholders assess both the financial health of the insurer and their efficiency in settling claims.

Can a High Incurred Claim Ratio Impact Future Premiums and Policy Terms for Policyholders?


A high ICR, especially one consistently over 100%, can have implications for policyholders. It may lead to the insurance company adjusting their premiums, policy terms, or benefits to mitigate financial losses. This could result in increased premiums or changes in policy benefits for future policyholders or when existing policies are renewed.

How Should Policyholders Interpret Incurred Claim Ratios in the Context of Newer Insurance Companies?


For newer insurance companies, a high ICR might not always reflect their claim settlement efficiency or financial health accurately. It could be due to a lower volume of premium collections in their initial years. Therefore, when evaluating newer companies, policyholders should consider other factors like the company's growth trajectory, market reputation, and range of policy offerings, in addition to the ICR.