PSU general insurers paid Rs.9.40 out of Rs.10 they collected in FY 2017-18

IRDAI’s annual report shows that the incurred claims ratio of the non-life insurance industry declined from 91% in FY 2016-17 to 85% in FY2017-18.

Incurred claims ratio is the net incurred claims to net premium. Simply put, it is the claims received for the premium paid towards insurance policies in a year; hence, a low incurred ratio indicates healthy growth prospects and higher profitability in non-life business. Typically, a ratio of less than 100 indicates that insurers are making money.

Since the incurred claim ratio of the non-life industry was less than 100% for all segments, the industry would have recorded profit last fiscal.

However, from policyholders’ perspective, higher incurred claim ratio indicates higher chances of getting claims from the company, say experts.

While the incurred claim ratio of private non-life insurers saw a fall from 79% in FY 2016-17 to 76% in FY 2017-18, PSU general insurers limited their losses by recording incurred claim ratio of 94 last fiscal compared to 100% in the preceding fiscal.

Health insurance continued to remain a cause for concern for general insurers since the segment recorded 92% incurred claim ratio in FY 2017-18. Such a high incurred ratio indicates that non-life insurers incurred hefty losses in this segment, which affected their growth. Surprisingly, there was a huge difference between the incurred claim ratio of public and private non-life insurers. The annual report shows that the net incurred claims ratio (ICR) of the public sector non-life insurers stood at 110% compared to 71% of their private peers in FY 2017-18.

There was some respite for insurers in the motor insurance category. An increase in third party motor insurance premium tariff helped non-life insurers limit their loss ratio in the motor insurance segment to some extent. The incurred claims ratio of the motor segment declined to 83% in 2017-18 from the previous year’s ratio 88%.

In absolute terms, the net incurred claims of the general insurers stood at Rs.85651 crore in 2017-18 as against Rs.80662 crore in 2016-17.