Difference Between Incurred Claim Ratio & Claim Settlement Ratio

Whenever it comes to purchasing a health insurance policy, there are several things that matter. One has to keep a number of factors in mind at the time of purchasing the right policy. In this regard, the two greatest aspects that you need to consider are- Incurred Claim Ratio and Claim Settlement Ratio. They can be pretty confusing. Although both of them might seem the same at the surface, but several subjective matters make them different from each other.

What do we mean by an insurance claim?

Before digging deeper into the differences and the similarities, one needs to understand what exactly an insurance claim is. When the insured person meets the maturity or other certain terms, the insurance company is bound to provide the assured sum; this is what an insurance claim is all about.

What is Incurred Claimed Ratio?

Incurred Claim Ratio (ICR) is termed as the ratio of claims which is incurred by the company to the actual premium collected over the course of time. It can also be defined as the net claim settlement cost that is incurred to the overall premium collected over an exact period. One of the simplest formulas to calculate Incurred claim Ratio is:

ICR = Net claims incurred/Net earned incurred

Let’s get a better understanding of this subject. For example, an insurance company’s incurred claimed ratio is 80 percent. This indicates that for every Rs. 100 earned in the form of premium, Rs. 80 is spent on the claims. In the end, the company makes only a profit of Rs 20. Now, if the company is suffering through losses, then the incurred claim ratio is always above 200%.

So, the next time when you start looking forthe right insurance company, you must keep in mind that more the ICR, the better the chances of a claim. At the same time, with the company’s point of view, the higher the ICR, the more chances for the company to run into losses. So, make a clear understanding and choose only those health insurance companies whose ICR works for both ways around.

What is Claim Settlement Ratio?

The claim settlement ratio on the hand is defined as the total number of claims that have been settled over a period of time. Take, for example, if the Claim settlement ratio of a given insurance company is 95%, then it means out of every 100 claims, only 95 of them were settled.

When it comes to putting your trust into an insurance company, Claim Settlement Ratio is the one to look at. The higher the claim settlement ratio of the insurance company, the higher are your chances of a settlement. The claim settlement ratio also reflects the reputation of the insurance company.  With a higher CSR, there is a better chance of the company being robust at its services as compared to that of the lower CSR companies. It also works as an assurance from the insurer that their company is trustworthy.

One of the main reasons for paying off our insurance policies responsibly is for getting a good return. The same is also applied to the insurance company. That is why Claim Settlement Ratio is always there to ensure whether we can trust the company or not. Another thing about CSR is that it is also applicable to life insurance plans.

Comparison between ICR and CSR

While both the terms might still seem confusing to you, always keep in mind the relation between the two. The below-mentioned points could help you out to have a better understanding before making any final judgment:

  • When it comes to the insurance companies, the higher the CSR, the more trustworthy the company can be. While at the same time, with a higher ICR, there is likely to be more chances for the company to go bankrupt with clear signs for losses.
  • Don’t just always get impressed by the CSR or ICR of the company. A higher premium rate should never come in between your judgment.
  • Always consider choosing parameters such as the quality of services, sensitivity for the claimants as well as the period for the settlement of the claim. Everything about an insurance company shouldn’t be judged by its ICR or CSR.
  • Go through the IRDAI published reports to get a better view on different aspects covered by the insurance companies apart from ICR or CSR. Details of the insurer such as claim data, industry average as well as CSR of other companies are also given in the report.


While finding the best value for your money, don’t just always go by the numbers. Do your thorough research and compare between the ICR and CSR on your own. Try talking out with different insurers or financial planners before settling down to any conclusion. After all, it is your money at stake. Always take the smart step by doing your homework. Doing a little bit of research on the internet about the different health insurance companies can provide you with a better idea of the current situation.