Health insurance is an important but often neglected part of healthcare in India. Due to the unimpressive health insurance penetration in the country, most people still lack knowledge about this financial safety net. Even those who understand its significance often struggle to get the right plan from the right insurer.
There are so many players in the market that it leads to confusion amongst potential policyholders. Moreover, insurance-industry jargon like CSR, ICR, no-claim, etc., clearly does not help.
Through this article, we hope to dispel some of that confusion and provide clarity on one of the key aspects of choosing the right insurer: the Incurred Claim Ratio (ICR). We’ll discuss other aspects, such as CSR, in subsequent articles. In this one, let’s delve into what the ICR is, what it tells us, and the ICRs of popular health insurers:
The actual “best” plan can vary based on individual needs, so it’s critical to do personal research or, better yet, speak to one of Ditto’s IRDAI-certified experts and get solid insurance advice. Book a 30-minute call with us today!
What is the Incurred Claim Ratio in Health Insurance?
The Incurred Claim Ratio (ICR) is one of the most important metrics to assess a health insurer's credibility. It tells us how much an insurer pays out in claims for every ₹100 they receive in premiums every policy year. Another way to look at it is the ratio between the sum of money given out in claims and the amount collected in premiums in a year multiplied by 100.
How is the Incurred Claim Ratio calculated?
The formula to calculate the ICR is simple: (Total Amount of Claims Settled/Total Premiums Collected) * 100
For a better understanding of ICR calculation, let’s use an example:
Say an insurer has settled ₹65 crores in claims and collected ₹100 crores in premiums in a year. Therefore, for that year, the insurer’s ICR would be:(65/100)*100= 65%
This means the insurer spent 65% of its earnings on claim settlements — a promising sign that they prioritize paying out valid claims.
What is the Importance of the Incurred Claim Ratio Metric?
The Incurred Claim Ratio (ICR) is more than just a number — it’s a window into an insurer’s financial strength, commitment to policyholders, and ability to settle claims in the long run. Let’s break down why this metric is essential when evaluating a health insurance provider:
1. Financial Sustainability:
A well-balanced ICR indicates that the insurer is managing its resources wisely. If they’re paying out claims without consistently draining their premium pool, it signals long-term financial stability. An insurer with sustainable finances is more likely to stick around for years to come — giving you peace of mind that your coverage will be reliable, even during large-scale health crises or rising medical costs.
2. Claim Settlement Potential:
An insurer's ability to settle claims when policyholders need them most is critical. A healthy ICR suggests the insurer is financially equipped to honor claims not just today but well into the future. This reduces the risk of facing partial settlements, delayed payouts, or rejected claims due to the company’s financial strain. After all, the whole point of health insurance is to have your back during medical emergencies — and a strong ICR assures you that support will be there.
3. Policyholder-Centric Approach:
ICR can also hint at how much an insurer values its customers. An ICR that’s too low (say below 50%) might suggest the insurer is overly focused on profits, potentially leading to tighter claim approvals or stricter policy terms. On the other hand, an ICR consistently above 100% means they’re paying more in claims than they earn in premiums — which, while generous in the short term, could signal financial trouble down the line. The sweet spot? An ICR between 50%–80%, where the insurer is balancing customer needs with financial prudence.
How to Choose the Best Insurer Based on the Incurred Claim Ratio?
The Incurred Claim Ratio (ICR) is a valuable indicator of an insurer’s financial practices and approach to claim settlements. Interpreting the ratio correctly can help you make an informed decision when choosing a health insurance provider. Here’s what different ICR ranges typically signify:
ICR Below 50%: Cause for Concern
An ICR under 50% indicates that the insurer pays out less than half of the premiums collected as claims. While this might suggest financial stability, it can also be a warning sign for policyholders. The insurer may be overly strict with claim approvals, rejecting valid claims, or structuring policies with numerous exclusions to minimize payouts. For instance, if an insurer collects ₹100 crores in premiums but pays only ₹40 crores in claims, it could mean either the customer base is exceptionally healthy or the insurer is excessively cautious in settling claims. This approach can lead to claim delays, partial payouts, and frustration for policyholders.
Recommendation: It may be wise to avoid insurers with consistently low ICRs, as this could indicate a profit-first approach at the expense of customer welfare.
ICR Between 50% and 80%: The Optimal Range
An ICR in this range usually reflects a healthy balance between claim settlements and financial sustainability. The insurer actively pays claims while retaining enough funds to cover future liabilities, manage operational costs, and handle unexpected surges in medical expenses. For example, if an insurer has a 70% ICR, collecting ₹100 crore in premiums and paying ₹70 crore in claims, it demonstrates responsible risk management and a policyholder-centric approach. This balance is essential for maintaining long-term financial stability without frequent premium hikes or tightened claim policies.
Recommendation: Insurers within the 50–80% ICR range are generally a reliable choice, as they show both financial strength and a genuine commitment to honoring claims.
ICR Between 80% and 100%: Caution Advised
An ICR approaching 100% suggests that the insurer is paying out almost all of its premium revenue as claims. While this may seem favorable, it can also indicate thin profit margins and financial vulnerability. If claims rise unexpectedly, the insurer might struggle to maintain solvency, leading to higher premiums or stricter claim evaluations in the future. For instance, an insurer with a 95% ICR pays ₹95 crore in claims for every ₹100 crore collected, which is good for policyholders in the short term but may not be sustainable in the long run.
Recommendation: While insurers in this range can still be a viable option, it’s prudent to check ICR trends over several years to ensure consistent financial health.
(Special Note: In some cases, even if the health insurance provider in question has an ICR that is slightly above 80%, experts do recommend them. The reason is that such providers have shown promising claim settlement track records, which proves that the brand is financially stable enough to spend more on claim settlement than focus on its business profitability.)
ICR Above 100%: High-Risk Territory
An ICR above 100% indicates the insurer is paying out more in claims than it collects in premiums, potentially operating at a loss or relying on reserves to cover the gap. This could happen due to underpriced premiums, poor risk management, or an unusually high volume of claims. For instance, if an insurer collects ₹100 crore in premiums but pays ₹120 crore in claims, it may seem beneficial for policyholders initially, but such a pattern is unsustainable without significant corrections. Over time, this could lead to steep premium increases, policy restructuring, or, in extreme cases, the insurer exiting certain markets or products.
Recommendation: It’s best to approach insurers with an ICR above 100% cautiously. If this trend persists, it could indicate potential financial instability, even if claims are currently being paid out promptly. This could lead to frequent premium hikes or worse, rejections/partial settlements.
Incurred Claim Ratio of the Best Insurers in 2025
| Best Health Insurers | 2021-2022 | 2022-2023 | 2023-2024 | Average of 3 years (2021-2024) |
|---|---|---|---|---|
| HDFC ERGO | 97% | 79% | 81% | 86% |
| Care | 65% | 54% | 58% | 59% |
| Star | 87% | 65% | 66% | 73% |
| Bajaj Allianz | 91% | 74% | 85% | 83% |
| Niva Bupa | 62% | 54% | 59% | 58% |
| ICICI Lombard | 92% | 77% | 79% | 83% |
| TATA AIG | 87% | 78% | 78% | 81% |
| Aditya Birla | 70% | 65% | 68% | 68% |
| Industry Average | 91% | 80% | 81% | 84% |
Note - General insurers like HDFC ERGO and ICICI LOMBARD tend to have a higher Incurred Claim Ratio (ICR) than standalone health insurers (SAHI) like Aditya Birla & Care for the same health insurance segment due to differences in specialization, risk selection, and portfolio management. General insurers handle multiple types of insurance (motor, travel), making health insurance a secondary focus, often leading to less stringent underwriting and pricing. They also rely heavily on corporate and group health policies, which generally have higher claims due to lower premiums and greater utilization. In contrast, SAHIs specialize solely in health insurance, allowing them to optimize underwriting, control costs more effectively, and selectively price policies to maintain a more balanced claims ratio.
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Conclusion
The Incurred Claim Ratio (ICR) is a valuable tool to assess an insurer’s financial health and approach to settling claims, but it’s only one piece of the puzzle. While an ideal ICR between 50%–80% suggests a balance between sustainability and customer care, relying solely on this metric might give you an incomplete picture.
When choosing a health insurance provider, it’s equally important to consider other factors like the Claim Settlement Ratio (CSR), customer complaints, product offerings, pricing, and the overall claims experience. A policy with great ICR numbers but a frustrating claims process or limited coverage might not serve you well in the long run.
Health insurance is a long-term commitment, and picking the right insurer can make all the difference during medical emergencies. So, take your time, do your research, and if you need a little guidance — you know where to find us!
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