What is Incurred Claim Ratio And How is it Calculated?

IRDAI, or the Insurance Regulatory and Development Authority of India has always been vigilant to measure how many insurance brands are settling the amount of claims over the amount of premiums they receive. This is a way by which IRDAI can distinguish between the insurance agencies that are actually being helpful in aiding customers, and spotlight the ones that are late in settling the claims. For now, let’s think of incurred claim proportion as a way by which IRDAI can measure the progress of insurance providers in their claim settlement process.

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What Is Incurred Claim Ratio?

Incurred claim ratio (ICR) is the measurement index that measures the actual amount (value) of claims settled by an insurance provider as compared to the amount of premiums it has collected. In 2021, the total population of India was 1.428 billion, but only 400 million Indians had access to health insurance. This is a major reason why IRDAI has a checklist for all the insurance providers to monitor the claim settlement process. ICR provides an easy way to keep a close watch on the incurred ratio, which is a benchmark for checking the performance of the insurance providers.

How to Calculate Incurred Claim Ratio?

Every insurance provider has a specific way to calculate the ICR ratio. Still, you wish to calculate it manually, you would need access to the amount of premiums received and the amount of claims settled. Let’s take a look at the formula first.

Formula For Incurred Claim Ratio

Incurred claim ratio formula = (Total value of settled claims)/(Total value of premiums received from policyholders) x 100

As an example, if an insurance company has received claims worth ₹20 crores and has settled claims worth ₹15 crores out of that, it means it has ICR of: (15,00,00,000/20,00,00,000) x 100 = 75%

Insurance Companies With High Incurred Claim Ratio

Here are a few top insurance companies that have a high claim ratio in 2023-24, as per the data available in IRDAI Handbook of Indian Insurance:

As per the reports of IRDAI in 2023-24, the total number of pending claims in the private sector was equal to 0, which means a 100% insurance claim ratio.
Most of the insurance companies in India, whether in the private or public sector, have a high health insurance claim ratio. IRDAI has taken a number of steps to improve the claim settlement percentage, such as simplifying the claim settlement process and setting up guidelines to protect the policyholder's rights.

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How to Check Incurred Claim Ratio for an Insurance Company?

Usually, the incurred ratio is displayed by the insurance provider on their website. Yet, if you cannot find it on the company site, you may have to manually search for the exact claim ratio percentage. One way to inquire about this is to navigate through the official website of IRDAI and check the incurred ratio of your insurance provider. Although IRDAI does not publish the ICR ratio of every insurer, you may have to specifically inquire with your insurer in that case. The steps to do that are:

• Contact your insurance provider or mail them
• Ask them specifically about the amount of claim settled in the most recent year
• You will be receiving a short notification or a mail that mentions the ICR ratio of the insurance provider
• In case you do not receive a follow-up from them, you need to check in with Bima Bharosa, an IRDAI site to lodge all insurance-related complaints. You can register a formal grievance about not being updated with the ICR by logging into the website.

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Differences Between Incurred Claim Ratio and Claim Settlement Ratio

There are certain differences between the incurred claim settlement ratio and claim settlement ratio, although they are used interchangeably. But first, let's walk through the two concepts, and then classify them.

Incurred Claim Ratio (ICR)

This is a specific claim ratio published by IRDAI in every financial year. Now, let’s discuss the incurred claim ratio meaning. In simpler terms, ICR refers to the total claims amount settled by the insurance provider compared to the total premium amount collected in a given year. It indicates a close relationship between the premium received and the amount of claims paid out, so it serves as a quick reference for IRDAI.

Example

Companies that have a high ICR tend to have a higher number of policyholders, the reason being that the company settles a higher value of claims against the premium received. For example, if an insurance company receives a premium of ₹8 crores in a financial year and settles ₹7.8 crores worth of claims, the company has an ICR of: ICR = (Total amount of claims settled)/(Total amount of premium collected) * 100 ICR = 7.8 crores/8 crores * 100 ICR = 97.5%

Claim Settlement Ratio (CSR)

CSR is a different parameter that an insurance provider measures for checking their annual performance. To state simply, claim settlement ratio measures the number of claims settled out of the total number of claims received by an insurer. CSR is used as a measuring tool by insurance providers, and this indicates the performance of the insurer as well.

Example

A simple way to understand this is to measure how many claims an insurance provider settles in a specific month. For example, an insurance provider has received a total of 12,000 claim requests in 2025. Out of 12,000 claims, if the insurance provider settles 10,000 claims, then their claim settlement ratio will be: CSR = (Number of claims settled in a given year/Total number of claims in a given year) * 100 CSR = 10,000/12,000 * 100 CSR = 83.33%

Major Differences Between ICR and CSR

The fundamental difference between claim settlement and incurred claim is the treatment of the insurance claim settled. While both of these measure how much of the claims were settled, they both have different ways of measuring the settlement of claims. ICR considers only the amount of claims settled, while CSR considers the number of claims settled. Also, note that the premium collected by an insurer is not equivalent to claims received, as both of these are two different concepts.

ICR measures the amount of claims settled in terms of premium collected by the insurance provider, while CSR measures the number of claims settled in terms of number of claims received by the insurance provider.

If this sounds confusing to you, here is a table to navigate through the differences more clearly.

Note that there are different percentages to consider while you are checking the incurred claim settlement ratio. A 100% incurred ratio, for example, means that the insurance provider has a stable financial position and is quite capable of settling claims amount within time. Here is a quick chart to refer to:

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Conclusion

In short, the incurred claim ratio measures the financial health of the insurer by measuring the net value of claims settled against the total amount of premium received. This serves a dual purpose, one being to measure the success of the company in settling its health claims. The second is to show the financial position of the company, which can be a valuable asset to know the liquidity position of the company too. Check the health insurance claim ratio of any insurance provider before purchasing insurance, as a word of caution. This will help to make an informed decision based on the record of the company.