What is Incurred Claim Ratio?
Incurred Claim Ratio refers to the total value of all claims that the health insurance firm has paid-out in a given financial year against the total amount of premiums that they collected during the same year. The Incurred Claim Ratio is a good indication of the company’s ability/willingness to provide a payout when a claim is raised. Thus, if a company’s Incurred Claim Ratio is higher is 100%, it would indicate the company has paid-out more in claims than what it collected as premiums during the fiscal year. Whereas, if the company’s Incurred Claim Ratio is lesser than 100%, it would indicate the insurer has paid a lesser amount of money as claims in comparison to the premiums that it collected. The Insurance Regulatory and Development Authority of India (IRDAI) publishes the Incurred Claim Ratio for all health insurance firms in India, every financial year.
What is Claim Settlement Ratio?
The Claim Settlement Ratio (CSR) of an insurance company indicates the insurer’s capacity to settle a higher number of claims per year. For instance, if the CSR of an insurance company is 95% for FY15-16, it means that the insurer has settled 95 claims out of 100 in that financial year. The formula for calculating claim settlement ratio is as follows:
Claim Settlement Ratio = (Total Claims Settled) / (Total Reported Claims + Outstanding Claims at Start of Year – Outstanding Claims at End of Year)
Claim Settlement Ratio also lets you know the claim settlement history of an insurance provider. A new insurance company may have a lower claims ratio. The CSR of an insurance company is a parameter to consider when choosing the right insurance plan.