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  • IRDA Incurred Claim Ratio of Health Insurers in India

    The IRDA, or Insurance Regulatory and Development Authority publishes the Incurred Claims Ratio for health insurance companies in India. Incurred Claim Ratio is basically the overall value of every claim a company has paid divided by the total sum of premium collected during the same period. Incurred Claims Ratios are calculated on an annual basis, and the ratios for 2014-15 and 2013-14 have been listed below for the sake of comparison.

    Incurred Claim Ratio = Net Claims Incurred / Net Earned Premium

    Incurred Claim Ratio of Health Insurance Companies - A Comparison:

    Insurer

    Net Earned Premium (in lacs)

    Net Claims Incurred (in lacs)

    Incurred Claims Ratio (%)

    2013-14

    2014-15

    2013-14

    2014-15

    2013-14

    2014-15

    PUBLIC SECTOR HEALTH INSURERS

    National

    United

    Oriental

    New India

    259,216

    207,502

    284,120

    162,988

    332,965

    299,246

    200,410

    368,785

    270,331

    273,098

    275,179

    185,417

    366,344

    356,057

    234,517

    364,302

    104.29

    114.26

    96.85

    115.23

    110.2

    118.98

    117.02

    98.78

    PRIVATE SECTOR HEALTH INSURERS

    Bajaj Allianz

    65,513

    69,512

    56,733

    51,152

    86.60

    73.59

    Bharti AXA

    16,453

    19,117

    14,201

    18,636

    86.32

    97.48

    Cholamandalam

    21,002

    19,635

    12,960

    10,295

    61.71

    52.43

    Future Generali

    14,401

    14,192

    12,218

    11,345

    84.85

    79.94

    HDFC Ergo

    40,606

    58,145

    37,725

    32,843

    92.91

    56.48

    ICICI Lombard

    114,832

    106,110

    106,816

    92,720

    93.02

    87.38

    IFFCO – TOKIO

    19,741

    29,989

    17,209

    27,714

    87.17

    92.41

    Liberty Videocon

    41

    3,747

    36

    3,843

    88.29

    102.56

    L&T

    4404

    3,502

    3,992

    1,819

    90.64

    51.93

    Magma HDI

    0

    66

    0

    61

    0

    92.67

    Raheja QBE

    2

    35

    1

    41

    96.45

    116.54

    Reliance

    37,663

    44,927

    36,827

    48,291

    97.78

    107.49

    Royal Sundaram

    20,603

    22,577

    11,761

    11,942

    57.09

    52.89

    SBI

    912

    24,252

    443

    19,492

    48.63

    80.37

    Shriram

    143

    214

    129

    152

    90

    70.91

    TATA AIG

    17,906

    35,591

    15,449

    24,892

    86.28

    69.94

    Universal Sompo

    6481

    9,955

    7060

    10,176

    108.95

    102.22

    PRIVATE SECTOR STANDALONE HEALTH INSURERS

    Apollo Munich

    54,340

    65,588

    35,644

    41,343

    65.59

    63.03

    Cigna TTK

    1

    667

    1

    429

    59.68

    64.33

    Max Bupa

    23,766

    31,524

    14,040

    17,388

    59.07

    55.16

    Religare

    8,164

    15,372

    6,525

    9,397

    79.92

    61.13

    Star Health

    67,540

    101,793

    45,395

    65,106

    67.21

    63.96

    What do Incurred Claim Ratios Mean?

    Incurred Claims Ratio shows the ability of a company to make payments towards claims. If the ICR of a company is more than 100%, it indicates that the amount of money given away by the company as claim is more than the amount of money collected by the company as premium. In such cases, the company will find it hard to sustain itself, and as a result, will either resort to rejecting some borderline claims, raise the price to better manage claims, or change their product altogether.

    If the ICR of a company is between 50% and 100%, it indicates that the company has collected more money as premium than it has given away as claims. In such cases, the company makes profits and means that the company has not only produced a quality product, but has also succeeded in selling it to customers and helping them understand where claims must be made and where they shouldn’t.

    If the claim is less than 50%, it means that the company is either hardly giving out claims or is making relatively large profits. However, the fact that the company is generating considerable profits is not necessarily a good thing as all health insurance companies should offer products that actually pay out claims within the correct limits. In case claims are low, then customers who purchase such products realise over a period of time that the health insurance policy is costly and/or the number of exclusions in the policy are way too many, and thus shift to a better or more efficient product. Hence, the perfect value of ICR ranges between 75% and 90%.

    Things to Consider :

    While ICR is a fine yardstick with which the performance of a company can be measured, it does not tell the whole story. Following are the points to consider with regards to the ICR of a company.

    • Time taken for settlement of claims: While ICR is calculated by comparing the claims settled by a company against the collected premiums, the time taken for the settlement of claims in not considered. Hence, the insurer may have recorded a ratio between 90% and 95%, but the claim settlement process may still take as long as four to six months, making it a rather hassling experience for the individual. So basically, the customers will have to wait patiently for the settlement of claims while the insurer delays it while maintaining a healthy ratio at the same time.
    • Low earnings: Insurers who operate start-ups may not have earned a substantial amount of money through premiums initially in its first few years of operations, thus making the claims experienced relatively high. As a result, the ICR of the company will be more than 100% which means that the insurer is incurring losses due to the fact that the claim incidence in the initial years may have been significantly higher.

    Difference between Incurred Claim Ratio and Claim Settlement Ratio?

    Incurred Claim Ratios are often confused or mistaken for the same as Claim Settlement Ratios. A claim settlement ratio is basically the ratio of settled claims to the total claims filed in a particular accounting period. Hence, in case the claim settlement ratio of a company stands at 90%, it means that 90 claims out of the 100 filed have been settled. The remaining 10% are either pending or rejected by the insurance company.

    Conclusion:

    For instance, say Company A has an incurred claim ratio of 90% and Company B’s ICR is 95%, most customers will likely opt for Company B as their ratio is higher. However, Company A must also be given some consideration as Incurred Claim Ratio is not the factor based on which the reputation of an insurance provider is measured. The reason for this is that the time taken to settle claims is not mentioned in the ICR. Company B may have a higher ratio of 95%, but the time taken for the settlement of claims can be relatively high (six months or above). On the other hand, Company A has a lower ratio in comparison with Company B, but the time taken for the settlement of claims can be only a month or two, making it easier for a customer to settle his / her claims at a quicker rate than it would with Company B.

    Moreover, there may be other factors such as network hospital coverage, specific plan benefits such as premium rates and coverage that must also be considered when choosing a company as an insurance provider. The key to choosing the right health insurance provider is to compare the ratios and pay attention to the other important factors.

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