IRDAI Incurred Claims Ratio 2015-16 of General Insurance Companies in India

Incurred Claim Ratio is the ratio of claim incurred by the insurance company to actual premium collected in that period. You can consider it as the net claim settlement cost incurred to the net premium collected for a particular accounting period. It is one of the most important parameters to analyse the performance of an insurance company. IRDAI issues an annual report of the performance of general insurance companies which also contains the Incurred Claims Ratio of all the general insurance companies.

Why it is important to check ICR of non-life insurance companies?

The Incurred Claim Ratio indicates the reliability of the insurance company in terms of the claim settlement.  A higher Incurred Claim Ratio is always good for the policyholder and it indicates that the insurance company is successfully meeting its claim. In simple words, ICR indicates the company’s ability to pay the claim. But a Very high Incurred Claim Ratio also indicates that the insurance company is going into losses. If the Incurred Claim Ratio of an insurance company is more than 100%, then it means that the amount of money which the company is giving in the form of claims is more than the amount of money collected in the form of premium which indicates the ill financial health of the company.

How is Incurred Claims Ratio calculated?

Incurred Claim Ratio is calculated by dividing the total value of claims paid by the company with the total value of premiums collected by the company during a financial year.

Incurred Claims Ratio = Net Claims Incurred/ Net Premiums Collected

Let us understand this with an example:

XYZ Company earned a premium of Rs.10 lacs and spent Rs.9 lacs on claims during a particular financial year 2015-16. So now, according to the formula of Incurred Claim Ratio

Net premium earned = Rs.10 lacs

Net claim incurred = Rs.9 lacs

Therefore, Incurred Claims Ratio =9/10 (in lacs)

Thus, the ICR of the XYZ insurance company for the year 2015 will be 90%. This also means out of every Rs.100 received, the insurance company has spent Rs.90 out of it for payment of claims.

Check the latest Incurred Claims Ratio for the FY 2016-17

Incurred Claims Ratio of Non Life Insurance Companies for the year 2015-2016

S.No Private General Insurance Companies Net Earned Premium      (in lakh) Claims Incurred (in lakh) Total Incurred Claims  Ratio (%)
1 Kotak Mahindra 6 21 347.60%
2 Shriram 148106 149415 100.88%
3 Bharti AXA 115822 107161 92.52%
4 Liberty Videocon 29630 27194 91.78%
5 Reliance 199940 178751 89.40%
6 Magma HDI 37322 31883 85.43%
7 SBI General 120689 100127 82.96%
8 ICICI Lombard 482162 392821 81.47%
9 Future Generali 108144 87890 81.27%
10 IFFCO-TOKIO 280495 221967 79.13%
11 Royal Sundram 139002 108018 77.71%
12 TATA AIG 206274 159026 77.09%
13 L&T 29783 21896 73.52%
14 HDFC ERGO 170854 124416 72.82%
15 Cholamandalam 169080 122377 72.38%
16 Bajaj Allianz 422365 305386 72.30%
17 Universal Sompo 53056 37561 70.80%
18 Raheja OBE 2149 535 24.90%

 

S.No Public General Insurance Companies Net Earned Premium      (in lakh) Claims Incurred (in lakh) Total Incurred Claims  Ratio (%)
1 National 1079138 1028240 95.28%
2 New India 1495983 1314119 87.84%
3 Oriental 702390 587959 83.71%
4 United 1002287 880109 87.81%

 

S.No Stand Alone Health Insurers Net Earned Premium      (in lakh) Claims Incurred (in lakh) Incurred Claims Ratio (%)
1 Apollo Munich 77490 50065 64.61%
2 Cigna TTK 7096 5582 78.66%
3 Max Bupa 39311 23402 59.53%
4 Religare 28773 16472 57.25%
5 Star Health 151387 81445 53.81%

Source: IRDAI Annual Report 2015-16

Key aspects about Incurred Claims  Ratio:

  • ICR indicates the ratio of claim settled against the collected premiums, but it doesn’t indicate the time taken to settle the claim. A company may be having a very high ICR yet the claim settlement process may be lengthy.
  • ICR is different for different lines of general insurance business like Motor, Health, Fire, Marine and others. Collectively combining all gives us the total ICR of a company.
  • An Incurred Claim ratio of more than 100% can also be because of a startup insurer which doesn’t have substantial premium earning in the initial years of operation and has faced a high rate of claims.
  • A high ICR indicates that the insurance company is successfully meeting its claims.
  • Even if ICR is one of the most important yardsticks to measure the performance of a company, but it shouldn’t be the only parameter to analyze the company.

Also Read – IRDAI Claim Settlement Ratio 2015-16 of Life Insurance Companies in India.

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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