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Claim Settlement Ratio Vs Incurred Claim Ratio - What is the Difference?
Choosing the right health insurance policy can be overwhelming with so many options available in the market. Each plan offers different features and benefits, making it important to compare the plans before buying. Among key comparison factors, the Claim Settlement Ratio (CSR) and Incurred Claim Ratio (ICR) of the insurer play a crucial role. However, many get confused between the two. This article clarifies the differences to help you make an informed decision.
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- Claim Settlement Ratio Vs Incurred Claim Ratio - What is the Difference?
What is Claim Settlement Ratio (CSR) in Health Insurance?
Claim Settlement Ratio or CSR in health insurance refers to the percentage of total claims settled by an insurance company out of the total claims received in a given fiscal year.
Claim Settlement Ratio = (Total no. of Claims Settled / Total no. of Claims Received) x 100
For example, in case the insurance company settles 92 claims out of 100 claims received, then the CSR of the insurer will be 92%.
What is Incurred Claim Ratio (ICR) in Health Insurance?
Incurred Claim Ratio or ICR in mediclaim insurance refers to the total claim amount paid by the insurance company in comparison to the total health insurance premium collected in a given financial year.
Incurred Claim Ratio = (The total value of claims settled / The total value of premiums collected) x 100
For instance, if the health insurance company collects ₹100 crore in premiums and pays ₹88 crore in claims, then the incurred claim ratio of the insurer will be 88%. The remaining ₹12 crore will be considered as profit for the insurance company.
Health Insurance Claim Settlement Ratio Vs Incurred Claim Ratio
Take a look at the table below to understand the difference between the Claim Settlement Ratio (CSR) and the Incurred Claim Ratio (ICR):
| Categories | Claim Settlement Ratio (CSR) | Incurred Claim Ratio (ICR) |
| Meaning | CSR is the ratio between the total claims settled to the total claims received. | ICR is the ratio between the total claims paid to the total premiums received. |
| Publisher | Published by the insurance company on its official website. | Published by IRDAI in its annual report. |
| Specificity | The claim settlement ratio encompasses all insurance products provided by the company, not just health insurance. | The incurred claim ratio applies exclusively to claims filed under health insurance. |
| Ideal Ratio | The CSR above 95% is considered good. | ICR between 80% to 100% is ideal. |
| Consideration of Claim Settlement Period | It does not consider the claim settlement period. | It considers the time taken to settle the claims. |
| Reliability | Less reliable indicator to measure the health of an insurance company. | More reliable indicator to estimate the financial health of an insurance company. |
How Does Claim Settlement Ratio (CSR) Work?
The CSR acts as an indicator to measure the performance of an insurance company. In fact, it can be used to understand how likely an insurance company is to settle your health insurance claims.
The higher is the claim settlement ratio, the higher is the probability of your claim getting honoured. However, CSR does not consider the time taken to settle an insurance claim. A company can have a high claim settlement ratio despite taking months to settle the claims.
Where to Check the Claim Settlement Ratio of a Health Insurance Company?
The Claim Settlement Ratio or CSR of health insurance companies in India can be found on their official website. Notably, the CSR for all insurance providers is not published by the Insurance Regulatory & Development Authority of India (IRDAI).
Moreover, the CSR available on the company's website will be for the entire general insurance and not specific to health insurance claims. Therefore, it does not provide the actual picture of medical insurance claim settlement by an insurer.
How Does Incurred Claim Ratio (ICR) Work?
The incurred claim ratio depicts the financial health of the insurance company. If the ICR of an insurer is more than 100%, it means that the company is paying more towards claim settlement as compared to the premiums received. This could indicate that the insurer is suffering from financial losses and may either hike premiums or reject borderline claims to improve the ICR.
If the ICR is between 50% to 100%, it means that the insurance company is making profits. However, in case the ICR is lower than 50%, it indicates that the company is making enormous profits by paying fewer claims than the premiums received. This could either mean that the insurance company is rejecting more claims or is charging exorbitantly high premiums.
Where to Check the Incurred Claim Ratio of an Insurance Company?
The Incurred Claim Ratio, or ICR of all general and health insurance companies in India is released annually by the IRDAI in the annual report. The insurance regulator provides the total ICR for the company as well as separate ICR for different types of general insurance products. Thus, you can refer to the annual report of IRDAI in order to check an insurance company's ICR.
FAQs
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Q1. What is the difference between CSR and ICR?
Ans: CSR stands for Claim Settlement Ratio, which is the percentage of claims an insurance company settles compared to the number of claims received. It reflects how many claims were successfully paid out. On the other hand, ICR stands for Incurred Claim Ratio, which shows the percentage of claims paid relative to the total premiums collected during a specific financial year. -
Q2. What is a good Claim Settlement Ratio (CSR)?
Ans: A good Claim Settlement Ratio (CSR) is generally above 95%, meaning the company settles at least 95 out of every 100 claims. A higher CSR suggests that the insurance provider is reliable when it comes to honouring claims. -
Q3. What is the best incurred claim ratio (ICR)?
Ans: An Incurred Claim Ratio (ICR) between 80% and 100% is considered good. This range means the company is maintaining a proper balance between claims paid and premiums collected. -
Q4. What is the formula for incurred claim ratio?
Ans: The formula of incurred claim ratio is:
ICR = (Total Claims Paid / Total Premiums Collected) × 100
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