Insurance Encyclopedia

Loss ratio and incurred claims ratio

Insurance finance and actuarial · Updated 17 October 2026

Schedule an appointmentMore in this topic

In short

Loss ratio, called the incurred claims ratio (ICR) in IRDAI data, is a general or health insurer's net incurred claims divided by its net earned premium for a period.

Also called: ICR, incurred claims ratio, claims ratio, loss ratio, net incurred claims ratio

What is the loss ratio?

The loss ratio shows how much of the premium an insurer earned in a period was used to pay or reserve for claims. IRDAI calls it the incurred claims ratio (ICR) and defines it as net incurred claims divided by net earned premium. An ICR of 80% means that for every ₹100 of premium earned, ₹80 went to claims. What is left must cover commission, operating expenses and profit.

"Incurred" claims are not the same as claims paid. They include claims paid in the period, plus the change in reserves for claims that have been reported but not yet settled, plus the change in reserves for claims that have happened but have not yet been reported (IBNR).

How the incurred claims ratio is calculated

Incurred claims ratio = net incurred claims ÷ net earned premium × 100

  • Net incurred claims = claims paid + closing claims reserves (including IBNR) minus opening claims reserves, all net of reinsurance recoveries.
  • Net earned premium = net written premium adjusted for the change in the unearned premium reserve, so only the part of premium relating to cover already provided is counted.

Worked example (illustrative numbers)

A health insurer writes a one-year policy portfolio on 1 October with net premium of ₹120 crore. By 31 March, half the cover period has passed.

Item₹ crore
Net earned premium (6 of 12 months)60
Claims paid by 31 March30
Reported claims still being processed12
IBNR estimate6
Net incurred claims48

ICR = 48 ÷ 60 = 80%. Dividing claims by the full written premium of ₹120 crore would wrongly suggest a ratio of 40%.

Incurred claims ratios in India

The IRDAI Annual Report 2024-25 gives the non-life industry ICR as 82.88% for 2024-25, against 82.52% the year before.

ICR, 2024-25Public sectorPrivate sectorStandalone healthIndustry
Fire78.07%65.00%Not applicable72.93%
Motor107.94%74.62%Not applicable85.51%
Health99.84%83.46%68.06%85.34%
All lines97.30%77.50%68.06%82.88%

Source: IRDAI Annual Report 2024-25, Table I.14.

IRDAI also publishes ICR for health insurance by segment (government, group and individual) and by insurer, which is widely quoted in the trade press.

Loss ratio vs claim settlement ratio

The two are often confused. The claim settlement ratio is the share of claims (by number or amount) that an insurer paid out of those it decided. The incurred claims ratio is a financial measure of claims cost against premium. A health insurer can have a high settlement ratio and a low ICR if its premiums are high relative to claims, and the reverse.

What the loss ratio means for distribution

  • Partners are judged on it. General and health insurers track the loss ratio of the business each broker, bank, dealer or agent brings. Group health accounts and motor dealer portfolios with high ratios face price increases at renewal or lower payouts.
  • Group health is the pressure point. Competitive group health pricing often produces ICRs above 100%. Brokers who place such accounts should expect insurers to push for rate corrections or reduced cover at renewal.
  • Explain ICR honestly to customers. Some advisers cite a low ICR as a sign of an insurer that refuses claims. ICR also reflects pricing, growth and portfolio mix, so it should be read with the claim settlement ratio and complaint data, not on its own.
  • Retail health renewals. Insurers use portfolio ICR to justify premium revisions on retail health products. Advisers who understand the ratio can explain a premium increase better at renewal time.
  • Watch the earned and written gap. Fast-growing insurers have a lot of unearned premium, which can make early-year ICR look low. Ratios settle as books mature.

Sources

Insurance finance and actuarialCombined ratioCombined ratio is a general insurer's claims ratio plus its expense ratio. Below 100% means an underwriting profit; above 100% means claims and costs exceed the premium earned.Claims and policyholder serviceClaim settlement ratioClaim settlement ratio is the share of claims an insurer pays out of all the claims it had to decide in a year, reported for life insurers by number of death claims and by amount.Insurance finance and actuarialIBNR (incurred but not reported) reservesIBNR (incurred but not reported) reserves are amounts an insurer sets aside for claims from events that have already happened but have not yet been reported to it at the valuation date.Insurance finance and actuarialExpense ratioExpense ratio is an insurer's commission and operating expenses as a share of premium. In India it is tested against the IRDAI Expenses of Management limits for each insurer.Health insuranceGroup health insuranceGroup health insurance is a single health policy issued to a master policyholder, usually an employer, that covers all members of a defined group, often with family members, under common terms.Insurance finance and actuarialGross written premium (GWP)Gross written premium (GWP) is the total premium an insurer writes in a period before deducting reinsurance, covering new and renewal business and, for general insurers, reinsurance accepted.

Cite this entry

Glotus456 Research. "Loss ratio and incurred claims ratio." Insurance Encyclopedia (India), updated 17 October 2026. https://www.glotus456.com/research/encyclopedia/loss-ratio

About this entry. Written by the Glotus456 Research team, a BFSI distribution consultancy in Gurugram working with insurers, NBFCs and FinTechs across India. It explains how things work and is general information, not legal, tax or financial advice. Rules change: check the current IRDAI regulation or circular, or the official scheme or tax source, before acting.