Know 5 Important Things about Incurred Claim Ratio in Health Insurance
Health insurance is a well-known financial product around the world.
Health insurance is a well-known financial product around the world. However, if you are purchasing health insurance for the first time, you may face some difficulties. Before you plan to buy a policy, you need to understand certain terms used in the insurance industry. One such factor is the incurred claim ratio. Wondering what it means?
Here's all you need to know about incurred claim ratio in health insurance!
What Does Incurred Claim Ratio Mean?
The incurred claim ratio is the ratio of an insurance company's net claims paid to its net premiums earned. Every year, the IRDAI publishes information on all companies' incurred claim ratio. A company's ability to pay claims is represented by its incurred claim ratio. If a company's ICR is greater than 100 percent, it suggests that the amount of money given away as claim is greater than the amount of money received as premium. In such circumstances, the company will struggle to stay afloat, and will either have to reject certain borderline claims, raise the price to better control claims, or modify their product entirely.
Simply put, incurred claim ratio assists policy buyers in evaluating the performance of their insurance provider. When finding a suitable health insurance plan, you should opt for one with a high incurred claim ratio.
Formula for Calculating ICR
Incurred Claim Ratio = total claims incurred by the insurer/ total premium collected from the policyholder.
While the ICR is a useful metric for assessing a company's success, it does not convey the complete story. The following are some things to think about when it comes to a company's ICR. Here are some important things that a policyholder needs to know about incurred claim ratio in health insurance.
1. Consider the time taken to settle claims
A high incurred claim ratio does not mean guaranteed effective or timely customer service. For example, just because a certain insurance company has an incurred claim ratio of 105%, it does not mean that the settlement procedure is quick and easy. Even if they can process more claims than the collected premium, it is not helpful if it takes months to be settled.
2. Consider the products
The company's incurred claim ratio may vary depending on the type of policies they provide. The average of these products is used to calculate the total incurred claim ratio.
3. If the Incurred claim ratio is less than 50 %
In this case, the insurance company can gain a lot of profits. However, it may not be productive for policy buyers. Basically, this means that the company collects more premium than the amount of claims it settles.
4. If the Incurred claim ratio from 50% to 100%
Such an incurred claim ratio is beneficial to both the insurance provider and the policyholders. This indicates that the insurance coverage is reasonably priced and includes the appropriate features. There is sufficient transparency, and policyholders are generally satisfied with the claim settlement process. The appropriate range for the Incurred Claim Ratio is between 70 and 90 percent.
5. If the Incurred claim ratio: more than 100%
When the incurred claim ratio exceeds 100%, the insurer has paid out more in claim settlements than the total premiums received during the financial year. In business words, it signifies that the company is losing money and that claims may be rejected soon. As a result, it's best to avoid buying health insurance from a company with an incurred claim ratio of more than 100%.
It is preferable to purchase the policy from a reputable and dependable insurer. Choosing an insurer with a lower incurred claim percentage solely to save money on health insurance premiums could lead to problems when it comes time to settle a claim.
As a result, it's a good idea to compare the incurred claim ratio with other important features such as the policy benefits, premium rates, claim settlement ratio of the insurer, etc. Following this evaluation, you can purchase a health insurance plan that meets your requirements from reputable insurance providers such as Care Insurance.
Mithilesh Singh is a digital marketing consultant, blogger, and founder of World News Portal