Of the total premium of Rs.100, non-life companies pay Rs.81 as claim

Despite the pandemic year, the incurred claim ratio (ICR) of the non-life insurance industry has witnessed a major decline to 81% in FY 2020-21 from 85.90% in 2019-20.

Incurred claims ratio is the claims received for the premium paid towards insurance policies in a year. Typically, a ratio of less than 100 indicates that insurers are making money. Hence, a low incurred ratio indicates healthy growth prospects and higher profitability in non-life business. On the other hand, it also means that non-life insurance has been paying less compared to premium they received.

For instance, an ICR of 85% implies that the company has spent Rs.85 on claims for every Rs.100 collected as premium.

Since the incurred claim ratio of the non-life industry was less than 100% for all segments, it may have helped the industry to increase profitability to some extent.

Both private insurers and public insurers have witnessed a decline in their incurred claim ratio. While private insurer’s claim ratio fell merely by 2% to 73.39%, public insurer’s claim ratio fell by 11% to 87.48% in 2020-21.

Also, the incurred claims ratio of health has increased to 89.51% in FY 2020-21 compared to 85.61% in the year 2019-20.

On the other hand, the incurred claims ratio of motor segments has decreased to 75.61% in 2020-21.

Among public sector general insurers, the incurred claim ratio of National, The New India, The Oriental and United Insurance stood at 86.23%, 84.19%, 95.3% and 88.45% and 101.46% respectively.

Similarly, among the private non-life players, Bharti Axa recorded lowest incurred claim ratio at 63.23% followed by Liberty General (63.47%) and Future Generali (66.39%).

Standalone health insurers remained profitable last fiscal. They paid 75.13% of the total premium received during FY 2020-21. Reliance Health and Aditya Birla Sun Life Health have paid less than 50% of the total premium received.

In absolute terms, the net incurred claims of the general insurers stood at Rs.1.08 lakh crore in 2019-20 as against Rs.1.01 lakh crore in 2018-19.