On premium of Rs.100, health insurers pay Rs.106 as claim

Thanks to the four PSU general insurers and a few private non-life insurers, the incurred claim ratio (ICR) of the non-life insurance industry witnessed a major shift from 89.51% in FY 2020-21 to 105.68% in FY 2021-22.

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. In a way, higher incurred claim ratio is good for policyholders. 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 health insurers was more than 100%, it may have reduced the profitability of general and health insurers to some extent.

IRDAI data shows that both private insurers and public insurers witnessed an increase in their incurred claim ratio. While private insurer’s claim ratio increased by 16% to 94.66%, public insurer’s claim ratio went up by a substantial 25% to 126.80% in 2021-22.

Among all insurers, The Oriental, IFFCO Tokio and National Insurers have the highest incurred claim ratio of 139.86%, 130.65% and 125.53%, respectively. 

Overall, 10 general insurers have incurred claim ratio of more than 100% in FY 2021-22. The other six insurers were The New India Assurance, United India Insurance, Cholamandalam, Universal Sompo, Edelweiss, Raheja QBE and Acko General.

On the other hand, standalone health insurers were not so good from policyholder’s point of view. Barring Star Health and Manipal Cigna, all standalone health companies have less than 70% of incurred claim ratio. 

Companies with less than 50% of incurred claim ratio were Go Digit, Shriram and Navi. 

On net basis, which includes overseas claims, the health insurers paid claim of Rs.63,361 crore in FY 2021-22. IRDAI said, “Overall, the net incurred claims under health insurance business of general and health insurers stood at Rs.63,361 crore in 2021-22 reported an increase of about 56% from previous year. There is an increase in Incurred Claims Ratio (ICR) of health business from 94% in 2020-21 to 109% in 2021-22 and increase is witnessed across all classes of health insurance business.”

Incurred claim settlement ratio FY 2021-22 (in %)
 

Source:IRDAI