Difference between Incurred Claim Ratio and Claim Settlement Ratio
Difference between Incurred Claim Ratio and Claim Settlement Ratio
Posted On : 19 January 2021, 6 Months Ago. Health-Insurance
Article Header

While health insurance is a vital necessity for families and individuals, understanding the technical nuances can be a bit daunting. If you’ve gone through a number of insurance brochures and now find yourself confused with all the technical banter. Do not fear, you are in good company. Health insurance plans being vitally important can be an algebraic problem to solve at first glance. Unfortunately, many insurance companies take advantage of this complexity and are known to over-sell unintended coverage to unknowing customers.

A report by the economic times showed that almost 48% of all individual health insurance was either unhappy with their insurance plan or were paying considerably higher premiums. For customers to make the most informed decision about which health insurance to buy, it's vitally important to understand a few key elements. Incurred Claim Ratio (ICR) and Claim Settlement Ratio (CSR) are two such terms that play a deciding role when a policyholder files a claim. Unfortunately, the difference between incurred claim ratio and claim settlement ratio are clearly understood. Not knowing the difference between the two often leads to significant out of pocket expenses. This article helps policyholders differentiate between the two, and also gives tips and what to keep in mind before jumping into a health insurance plan.


What is Incurred Claim Ratio (ICR)?


ICR is the ratio of total value of claims settled by an insurer to the total value of premiums collected by the insurance company in a given period. Let’s take a look at an example to understand this a bit better.

Let’s say Company A’s ICR is 75%. This means that for every 100INR of premium collected, Company A pays 75INR towards claim settlement. The remaining 25INR is Company A’s profit.

Insured claim ratio settlement tells us about the ability of the insurance company to pay a claim. If the ICR is more than 100%, it means that the total value of claims settled is greater than the total value of premiums collected. This implies that the company is incurring losses and might find it difficult to financially sustain much longer. In this situation the company will either increase premium payments or make fundamental changes to the policy to make it profitable. Such companies are more likely to reject borderline claims.

If the ICR is between 50% and 100%, is the best claim settlement ratio and a good indication that the insurance company has introduced a good product and is making a healthy profit. Additionally, this is a good indication that the company has taken great pains to educate customers about the claims process. As a result, customers would ideally know when to make claims and when not to.

If the ICR is lower than 50%, it implies that the insurance company is making exorbitantly high profit margins. This could be possible if the company is charging high premiums or rejecting claims. Both of which are undesirable for a customer. Another less likely scenario is when the company has a very healthy pool of insured policy holders.


What is Claim Settlement Ratio (CSR)?


There is a clear distinction between ICR and CSR. CSR is the ratio of number of claims settled to the number of claims made. Let’s look at an example to understand this a bit better.

Company B has a CSR of 90%. This means that out of a total 100 claims filed, 90 have been honoured.  

CSR is another great way to measure the health of an insurance company. However, this data is not published by IRDA for health insurance the same way it does for life insurance. CSR data found on the websites for health insurance claim settlement ratio could indicate settlement for overall general insurance and not specifically health insurance. As a result, the CSR may not be a very clear picture of the actual successful settlements for health insurance claims. Another important point to consider is the CSR doesn’t take into consideration the time taken to settle claims. This means that although Company B may have a CSR of 90%; however, the claim settlement process might be 4-6 months. This could be a hassle for the insurer in the long run.


Difference between Incurred Claim Ratio & Claim Settlement Ratio


Incurred claim ratio is commonly mistaken for claim settlement ratio, but they are not the same. The incurred claim ratio is equal to the value of all the claims the company has paid divided by the total premium collected during the same period. On the other hand, claim settlement ratio is the total settled claims divided by the total claims filed.




Armed with these facts and figures, you will be able to make informed health insurance decisions about your next insurance provider. In general, ICR is a better indication of the insurance company’s overall health. Make sure you go over the numbers carefully before signing the dotted line.

Secure your health with comprehensive insurance plans from Maxbupa

Tell us a bit about you

Whom are you buying for ?
Myself Icon Individual
Wife Icon Husband & Wife
Family Icon Family
Enter valid name
Enter Valid DOB
OTP sent Resend OTP
otp icon
OTP Expires in
I authorize Max Bupa to call me. This will override your existing registry in DNCR. I want to get my quote and policy details on WhatsApp.