Incurred Claims Ratio

What is Incurred Claim Ratio in Insurance?

Incurred Claims Ratio meaning (ICR), it is a key metric in IRDAI's annual report that measures the percentage of claims paid by an insurance company compared to the net premium earned during a financial year. It indicates the company's ability to pay claims and its financial strength.

Incurred Claims Ratio Formula :

ICR = (Net Claims Incurred / Net Earned Premium) x 100

For instance, an ICR of 75% means the company paid ₹75 in claims for every ₹100 collected as premium. Essentially indicates percentage of premiums received is paid as claims by the insurance company. 

Interpreting Incurred Claim Ratio Ranges (ICR Ranges):

• Ideal range : 70-90%, a good incurred claims ratio, indicating healthy claim settlement and profitability.
• Above 100%: Indicates losses, possibly due to faulty claims or bad underwriting practices.
• Below 40%: May indicate low claim payouts, potentially affecting policyholder satisfaction.

Importance of ICR:

1. Helps policyholders evaluate an insurer's claim settlement efficiency.
2. Indicates an insurer's financial stability and ability to meet policyholder obligations.
3. Informs premium pricing, with IRDAI potentially directing insurers to reduce premiums if actual claims are 10% lower than projected over three years.

How to find ICR of an Insurer?

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

Download Insurer Statistics:

• Annual Reports
• Health Insurance Statistics
• Performance of Non-Life/Life Insurers

Visit Insurance Intermediaries like Honvest (us) : we will help you with the latest data : Contact Us

Regards,

Honvest Team.