IRDAI, the Insurance Regulatory and Development Authority of India, publishes its annual report, which has the data of IRDA Incurred Claims Ratio, ICR for every financial year for the general insurance companies in India. The insurance companies also publish this data on a quarterly basis under public disclosures on their website.
Table Content
- What is Incurred Claims Ratio (ICR)?
- How Incurred Claims Ratio (ICR) is Measured?
- Incurred Claims Ratio (ICR) for FY 2023-24
- IRDA Incurred Claims Ratio (ICR) Ranges
- Below is the interpretation of various ranges of Incurred Claims Ratio (ICR)
- ICR between 70%- 90%
- ICR higher than 100%
- ICR below 40%
- Importance of Incurred Claims Ratio (ICR)?
- Key Points regarding Incurred Claims Ratio (ICR)
- Related posts:
What is Incurred Claims Ratio (ICR)?
Incurred Claims Ratio (ICR) is the percentage of claims paid by a non-life insurance company to the net premium earned during that financial year. It is the ratio of claims settled to the premium received. ICR indicates the ability of the company to pay claims raised by the insured. Incurred Claims Ratio (ICR) also suggests the financial strength of the insurance company with respect to the revenues received and claims paid. Incurred Claims Ratio is calculated for different lines of business such as Motor, Marine, Fire, Health, and others for a general insurance company.
Note: IRDA Published an Annual report for the claims Ratio of insurance companies in India, know all companies
How Incurred Claims Ratio (ICR) is Measured?
Incurred Claim Ratio is calculated as the net claim settled by an insurer to the net premiums collected in any given year.
| Incurred Claims Ratio = Net Claims Incurred/ Net Earned Premium An Incurred Claim Ratio of 75% implies that the company has compensated Rs 75 as claim payout for every Rs 100 collected as premium |
Incurred Claims Ratio (ICR) for FY 2023-24
| Private Sector General Insurers | Net Earned Premium (in crores) | Claims Incurred (in crores) | Total ICR (FY 2023-24) |
|---|---|---|---|
| Bajaj Allianz | 6058.57 | 4042.57 | 66.72% |
| Bharti AXA | 1213.43 | 1006.73 | 82.97% |
| Cholamandalam | 2823.8 | 2048.4 | 72.54% |
| Future Generali | 1280.18 | 969.35 | 75.72% |
| HDFC ERGO | 2994.5 | 2226.68 | 74.36% |
| ICICI Lombard | 6911.73 | 5314.72 | 76.89% |
| IFFCO-TOKIO | 3236.31 | 2682.71 | 82.89% |
| Kotak General | 115.87 | 83.03 | 71.66% |
| Magma HDI | 334.58 | 277.42 | 82.92% |
| Raheja OBE | 60.19 | 46.02 | 76.5% |
| Reliance General | 2855.66 | 2419.14 | 84.7% |
| Royal Sundaram | 1940.44 | 1560.37 | 80.41% |
| SBI General | 1841.87 | 1316.45 | 71.47% |
| Shriram General | 1854.89 | 1738.1 | 93.70% |
| TATA AIG | 3326.97 | 2366.07 | 71.12% |
| Universal Sompo | 1197.29 | 674.03 | 56.30% |
| Public Sector General Insurers | Net Earned Premium (in crores) | Claims Incurred (in crores) | Total ICR (FY 2023-24) |
|---|---|---|---|
| National Insurance | 11266.55 | 12870.68 | 114.24% |
| New India Assurance | 19723.6 | 16896.46 | 85.67% |
| Oriental Insurance | 9628.01 | 8221.21 | 85.39% |
| United India Insurance | 12860.98 | 12137.81 | 94.38% |
| Standalone Health Insurers | Net Earned Premium (in crores) | Claims Incurred (in crores) | Total ICR (FY 2023-18) |
|---|---|---|---|
| Aditya Birla | 151.98 | 135.35 | 89.06% |
| HDFC ERGO Health | 1264.34 | 789.88 | 62.47% |
| ManipalCigna | 266.13 | 123.2 | 46.29% |
| Niva Bupa | 575.85 | 289.02 | 50.19% |
| Care Health | 679.67 | 353.21 | 51.97% |
| Star Health | 2739.6 | 1692.01 | 61.76% |
Source: IRDAI Annual Report 2017-18
IRDA Incurred Claims Ratio (ICR) Ranges
A higher Incurred Claims Ratio (ICR) is not healthy for the insurance company as it means lower margins.
Below is the interpretation of various ranges of Incurred Claims Ratio (ICR)
ICR between 70%- 90%
This is the ideal ICR range. An ICR range between 70% to 90% implies a healthy settlement of claims by the insurer against the premium collection. It means that for every Rs 100 collected as a premium, the insurance company pays between Rs 70 and Rs 90 as a claim in the same year. Thus the insurance company is making profits as it disburses a lesser amount of claims than what it earns as a premium.
ICR higher than 100%
This ICR range indicates that for every Rs 100 collected as a premium, the insurance company pays more than Rs 100 as claims in a financial year. ICR greater than 100% indicates that insurance company is incurring losses There could be various reasons like faulty claims, bad underwriting practices, etc. Another reason for more than 100% ICR could be that the insurance company is a new entrant in the industry and does not have substantial premium earnings in the initial years.
ICR below 40%
This ICR range means that the insurance company makes huge profits as the money spent on claims is far lower than the premium earned. Lower claims could be due to robust underwriting guidelines of the insurance company or charging higher premium rates as compared to other insurance companies. Lower ICR mostly implies that the insurance company’s products are expensive, policy coverage is low, too many exclusions and claim disbursements are lower. Lower claim payout suggests that the products of the insurance company are not good from the policyholder’s perspective.
Importance of Incurred Claims Ratio (ICR)?
The Incurred Claim Ratio shows the ability of the insurance company to pay the claims. When choosing an insurance company, one should take ICR into consideration as it indicates if that insurance company is paying the claims. But, having a very high ICR (more than 100%) or very low ICR (< 60%) is also not good. High ICR signifies that the insurance company is incurring losses. Very low ICR is also risky. It is advisable to pick a general insurer that has an ICR between 70% to 90%, as it indicates a healthy financial capacity of the insurer as far as the settlement of claims is concerned.
Key Points regarding Incurred Claims Ratio (ICR)
- Time taken to settle the claim is also a very important parameter while deciding the insurance company for making a purchase. ICR tells the ratio of claims settled against collected premium thus giving overall health of claim settlement in the company. A company might have an ideal ICR with a lengthy claim settlement process, thus it is important to assess the overall claims settlement process of the insurer.
- The ICR is different for different general insurance products like Motor, Fire, Marine, Health, and others. The total ICR of an insurance company is determined by combining the ICR of all its insurance businesses.
- Though ICR is one of the key parameters in assessing the financial health of an insurance company, it is not the only one. While purchasing a product one should look at its benefits and coverage and choose an insurer that suits the insurance requirements.