3. For Standalone Health Insurance Companies
What does ICR mean?
The Incurred Claims Ratio helps to identify the potential of a general insurance company for making payments towards the claim raised during a financial year.
When ICR is more than 100%: With ICR more than 100% indicates that the amount of claim given is more than the amount collected as premium. As the company is paying more than what is earned, the business is running in loss and thus, it’s quite tough to sustain in the business.
When ICR is between 50% and 90%: It indicates that a general insurance company is collecting the higher premium amount than what is being paid as claims amount during a financial year. It means the company is making profits and paying for claims as well.
When ICR is less than 50%: It indicates that the company is charging the higher premiums for its plans and making huge profits or hardly paying the amount towards the claim. Despite the fact that the company is generating huge profits in the business, it’s not wise to choose insurance products from such a company as you are at the risk of not getting the claim amount.
What’s an Ideal ICR Range?
When it comes to choosing a general insurance company for buying health insurance, motor insurance or other general insurance product, it’s recommended to pick a company having ICR in the range of 75% to 90%. Don’t go for an insurance company having ICR more than 100%.
Difference between ICR and CSR
People often get confused between Incurred Claims Ratio and Claim Settlement Ratio.
Incurred Claims Ratio is the ratio of total claims paid to the premium collected. For 85% ICR, the company is paying Rs 850 as claims for every Rs 1000 collected as a premium during a financial year.
Claim Settlement Ratio is the number of claims paid to the total number of claims received during a specific period. For instance, the insurance company receives 100 claims and pays for 95 claims, the CSR here would be 95%.
ICR and CSR are completely two different things. ICR applies for general/non-life insurance companies and CSR applies for life insurance companies.