Ignore Claim Settlement Ratio! Why Incurred Claims Ratio (ICR) is the Real Truth Detector for Insurers

📊 The "99%" Marketing Mirage (2026 Reality)

Every insurance agent begins their pitch with the same statistic:
"Sir, our company has a 99% Claim Settlement Ratio (CSR). We are the market leader!"

This metric is statistically misleading.
A company can achieve 99% CSR by paying 99 small flu claims of ₹5,000 and partially settling (or rejecting) 1 massive cancer claim of ₹50 Lakhs. They settled 99% of cases, but they did not pay the money that mattered.

If you want to know if a company actually pays out cash, you must look at the Incurred Claims Ratio (ICR). This is the financial truth detector.

1. CSR vs. ICR (The Critical Difference)

• Claim Settlement Ratio (CSR)
  Formula: (Total Claims Count Paid) / (Total Claims Count Received).
  The Flaw: It measures "Volume", not "Value". Paying ₹10 counts the same as paying ₹1 Crore. It also hides "Partial Settlements" where they cut your bill by 50%.
• Incurred Claims Ratio (ICR)
  Formula: (Total Value of Claims Paid) / (Total Premium Collected).
  The Benefit: This measures generosity. An ICR of 85% means for every ₹100 the company collected in premiums, they gave back ₹85 to customers as claims.

2. What is the "Sweet Spot"? (General Insurance)

For Health and Motor insurance, you want a balanced ratio.

• ICR < 60%: Low Payout Efficiency. The company is collecting premiums but rejecting claims aggressively or keeping huge profit margins. Caution recommended.
• ICR > 100%: Financial Stress. The company is losing money (paying out more than they earn). They face a high risk of bankruptcy or massive premium hikes next year. High Risk.
• ICR 70% - 90%: The Gold Standard. The company is paying claims generously but remains profitable and financially stable.

*Note: For Life Insurance (LIC, HDFC Life), ICR is naturally lower due to long-term accumulation. Use ICR primarily for Health/General insurers.

3. Where to Find the Real Data?

Do not rely on the marketing brochure.
1. Download the IRDAI Annual Report (available online).
2. Visit the insurer's website and look for "Public Disclosures" > Form NL-25.
Compare the ICR over the last 3 years. Consistency is key; a sudden spike to 110% suggests poor underwriting.

🛡️ Chief Editor’s Verdict

Check the Solvency Ratio too.

A company with 99% CSR but 40% ICR is great at paying tiny claims but terrible at supporting you during a disaster.
The Winning Formula: Choose an insurer with an ICR between 75-90%, a CSR above 95%, and a Solvency Ratio above 1.5 (mandated by IRDAI to ensure they have the cash to pay). This combination proves they are fair, generous, and secure.

Disclaimer: This article is for informational purposes only and does not constitute insurance advice. Insurance is the subject matter of solicitation. ICR and CSR data change quarterly. Always verify the latest figures from official IRDAI disclosures before purchasing.