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  • Incurred Claim Ratio of Health Insurance Companies in India

    Health Insurance
    • Premiums as low as Rs12/day for coverage of Rs.4 Lakhs*
    • 10,000+ hospitals for cashless treatment
    • Claim up to Rs. 55,000 deduction under section 80D**

    When it comes to choosing a health insurance company, various factors are used to ascertain the stability of a company. Incurred claim ratio is one of the metrics commonly used by people to determine the ability of a company in paying its insurance claims. The Insurance Regulatory and Development Authority of India (IRDAI) releases the data for incurred claim ratio for health insurance companies every year. The latest available data is for the financial year 2016-2017.

    What is incurred claim ratio?

    Before we check the data, we must know what exactly is incurred claim ratio. Incurred claim ratio refers to the total value of claims paid by a company against the total premium amount collected. It is a percentage value that can be calculated using the following formula:

    Incurred claim ratio = total claims incurred/total premiums earned

    This value is normally used to know the stability of an insurance company. For instance, if the insurer’s incurred claim ratio is higher than 100, it means that the company is settling more money in claims compared to the premiums collected. In other words, the company is losing money. When a company’s claim ratio is consistently higher than 100, it may not have enough profit to sustain in this field.

    On the other hand, if the company’s incurred claim ratio is way less, it could mean that the company is either not incurring too many claims or not settling its claims. When an insurance product is poorly designed, it may not deliver the intended benefits to customers. In such cases, the incurred claim ratio will be way too low. Hence, low incurred claim ratio need not necessarily mean that a health insurance company is good. The key is to choose a company with a balanced level of incurred claim ratio. Most private health insurance companies have incurred claim ratio between 75 and 90.

    With the proper understanding of incurred claim ratio, customers can choose the right company that meets their expectations. Anything between 50 to 100 indicate that the company is making profits and meeting the expectations of its customers.

    Incurred claim ratio of insurance companies

    The incurred claim ratio of popular health insurance companies can be given in the following table. The previous year’s value is given alongside for comparative purposes.

    Incurred claim ratio of Private Sector Health Insurers

    Insurer Net Earned Premium (in crore) Net Claims Incurred (in crore) Incurred Claims Ratio (%)
    2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
    Bajaj Allianz 793.32 1,015.03 594.50 796.76 74.94% 78.50%
    Bharti AXA 99.87 81.62 85.31 62.75 85.42% 76.88%
    Cholamandalam 225.52 271.95 100.50 108.97 44.56% 40.07%
    Future Generali 150.62 174.31 122.81 137.59 81.54% 78.93%
    HDFC Ergo 638.09 517.36 325.42 262.61 51% 50.76%
    ICICI Lombard 1,074.60 1,335.34 882.12 1,204.7 82.09% 90.22%
    IFFCO – TOKIO 415.31 513.26 432.96 535.34 104.25% 104.30%
    Liberty Videocon 66.77 73.4 70.79 54.58 106.02% 74.36%
    L&T 49.40 222.43 22.98 92.29 46.52% 41.47%
    Magma HDI 1.25 1.63 2.42 2.95 193.60% 180.98%
    Raheja QBE 0.19 0.09 0.18 0.11 94.74% 122.22%
    Reliance 549.48 333.31 526.79 328.29 95.87% 98.49%
    Royal Sundaram 215.65 226.22 126.31 140.46 58.57% 62.09%
    SBI 388.93 548.34 211.61 293 54.41% 53.43%
    Shriram 2.19 2.23 1.41 0.86 64.38% 38.57%
    TATA AIG 372.58 343.94 241.63 196.74 64.85% 57.20%
    Universal Sompo 137.31 98.07 116.81 84.47 85.07% 86.14%

    Incurred claim ratio of Private Sector Standalone Health Insurers

    Insurer Net Earned Premium (in crore) Net Claims Incurred (in crore) Incurred Claims Ratio (%)
    2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
    Apollo Munich 774.90 1,101.31 500.65 605.59 64.61% 54.99%
    Cigna TTK 70.96 181.77 55.82 87.50 78.66% 48.14%
    Max Bupa 393.11 544.28 234.02 282.81 59.53% 51.96%
    Religare 287.73 484 164.72 244.5 57.25% 50.52%
    Star Health 1,513.87 1,911.45 814.55 1,156.71 53.81% 60.51%

    Incurred claim ratio of Public Sector Health Insurers

    Insurer Net Earned Premium (in crore) Net Claims Incurred (in crore) Incurred Claims Ratio (%)
    2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
    National Insurance 3,887.09 4,021 4,291.35 5,105.82 110.40% 126.98%
    New India 4,450.45 6,129 5,101.80 6,309.68 114.64% 102.94%
    Oriental Insurance 2,359.60 3,109.63 2,701.32 3,676.4 114.48% 118.23%
    United India 3,751.21 4,575.93 4,585.96 6,338.24 122.25% 138.51%

    Things to consider

    The above table provides comprehensive details about the incurred claim ratio of an insurance company. Certain new start-up insurance companies may not have substantial earnings as they are still growing in the market. As a result, their incurred claim ratio was higher than other companies. Public sector insurers offer various schemes on extremely low premiums or zero premiums for people belonging to below poverty line families. As a result, their claim ratios are typically higher than that of private firms in the market.

    Difference Between Incurred Claim Ratio and Claim Settlement Ratio

    Incurred claim ratio might often get confused with claim settlement ratio. Claim settlement ratio refers to the percentage of claims settled out of the total number of claims filed. For instance, if the claim settlement ratio of an insurer is 95%, it means that the insurer has settled 95 claims out of the total 100 claim filed. The remaining 5% of the claims may be rejected for various reasons.

    When it comes to establishing the quality of a health insurer, incurred claim ratio is the most commonly used metric rather than the claim settlement ratio. The idea behind this is that all valid claims are settled by the company, and those that get rejected are often invalid claims resulting from poor documentation, lack of proof, or lack of adherence to deadline. Hence, this may not establish the credibility of a health insurer. With that being said, if the claim settlement ratio is drastically low due to some unknown reasons, it might warrant a second look.

    Conclusion

    In health insurance, there is no one-size-fit-all solution for customers. There are various metrics to be considered when choosing a health insurance company. Incurred claim ratio is just one of the factors used to determine the financial stability of a company. Customers must also check the reputation of the firm in the market and other factors such as time taken for claim settlement before choosing the right insurer.

    FAQs on Incurred Claim Ratio of Health Insurance Companies

    1. Where can I find the incurred claim ratio of an insurance company?
    2. If you’re looking for the incurred claim ratio of a company, refer to the official website of the insurer or the latest annual report published by the IRDAI.

    3. Should I pick an insurer with a high incurred claim ratio or a low incurred claim ratio?
    4. Typically, a high incurred claim ratio of a company indicates that the value of claims settled by the company is more. You would want to pick such a company as the probability of your claim being settled is high. A healthy claim incurred ratio is said to be in the range of 75% and 90%.

    5. The insurance company I have bought the policy from has a low claim incurred ratio. Should I switch to another company?
    6. The incurred claim ratio alone is not a factor that determines the credibility of the insurance company. The products offered, the pricing, the additional benefits, and the services offered are some of the factors you should look into before deciding which company you wish to buy the insurance policy from.

    7. Is it a good idea to choose a health insurance company that has an incurred claim ratio above 100%?
    8. If the incurred claim ratio is more than 100%, it could mean that the company is using a major chunk of the premium collected to settle claims. It could also mean the company is undergoing substantial loss. Most new insurance companies have an incurred claim ratio above 100% as the premium collected would be low but the number of claims would be high. Therefore, you should do an advanced research about the products and services offered by such companies, as well as the solvency ratio, combined ratio, and so on.

    9. Does the incurred claim ratio remain consistent?
    10. The incurred claim ratio of an insurance company may or may not remain consistent. It purely depends on the value of premiums collected and the value of claims settled. The IRDAI publishes a report regarding the performance of the insurance company as a whole and each of the insurance companies too. You can refer to the previous annual reports and the latest annual report to see whether the insurance company has progressed or not in terms of the incurred claim ratio.