Why insurers care deeply about Incurred Claim Ratio

When it comes to renewing corporate health insurance or group health insurance policies, the one metric that determines everything—from premium hikes to benefit adjustments—is the Incurred Claim Ratio (ICR). Insurers use this number as a profitability benchmark to decide whether a policy is working for them—or whether it’s time to shake things up. As an HR professional, understanding ICR gives you the upper hand in renewal negotiations.

The basics of ICR

ICR is calculated as the ratio of claims paid by the insurer to the premiums collected. Here’s why this metric matters:

• ICR below 60%: Insurers consider the policy profitable and may offer better benefits or reduced premiums.
• ICR between 70%-90%: This range reflects balanced claims—neither overly profitable nor loss-making.
• ICR above 100%: The insurer has paid more in claims than collected in premiums, resulting in losses. Expect premium hikes or trimmed benefits.

If your company’s ICR crosses 90-100%, brace yourself for higher premiums at renewal. You might even encounter restrictions, such as room rent limits or disease-specific caps. However, there’s more to ICR than meets the eye.

How is ICR calculated

Most insurers, brokers and TPAs will use one of the methods above. There might be minor variation - such as including an assumption of 3-5% for Incurred But Not Received (IBNR) claims.

HR role in ICR management

HR professionals are uniquely positioned to leverage ICR data during negotiations. Use this guide to make informed decisions:

Here’s the good news: if you work with a proactive insurance broker like Pazcare  which offers ICR reports via dashboards, you won’t have to chase these numbers down. You’ll already have the data you need for smarter conversations with insurers.

Practical tips for HR on ICR management

Managing ICR effectively requires strategic planning and proactive measures. Here’s how you can stay ahead:

1. Analyse ICR data proactively

• Request ICR reports from your broker or use tools on dashboards.
• Study yearly and rolling 2–3-year ICR trends to identify patterns.

2. Educate employees about claim processes

• Conduct sessions on claim submission procedures, network hospitals, and documentation.
• Employees who understand the process can avoid unnecessary claim rejections.

3. Address low ICR smartly

• A very low ICR (<50%) might signal poor employee awareness of benefits or issues with claims being rejected.
• Organise awareness drives and ensure your workforce understands how to utilize the policy effectively.

4. Strategise for high ICR

• Review large claims and prepare for potential premium hikes.
• Negotiate with insurers to maintain coverage while controlling costs.

5. Focus on wellness programs

• Promote preventive healthcare initiatives like annual check-ups and mental health support to lower claim frequency.

6. Collaborate with insurers

• Build strong relationships with insurers for transparent discussions on policy changes driven by ICR trends.

7. Monitor employee feedback

• Regularly gather feedback on the ease of claiming benefits to refine your approach.

When a high ICR is actually good

It’s easy to assume that a lower ICR reflects better outcomes—but not always. A higher ICR can indicate that employees are actively using their health benefits, which is a sign of awareness and engagement. Conversely:

• A very low ICR (<50%) might suggest employees don’t know how to claim or face rejection due to lack of knowledge about network hospitals or claim processes.
• In smaller companies (50–200 lives), even one or two large claims can skew your overall ICR, so data interpretation becomes crucial.

Beyond last year: The rolling ICR perspective

Insurers often use a rolling 2–3-year ICR to assess risk and determine pricing strategies. This longer timeline adds nuance to negotiations. If you’re aware of this, you can plan ahead to mitigate surprises during renewals. For example, identify patterns in claims over several years to anticipate potential price loadings.

The takeaway for HRs

ICR isn’t just a number—it’s a story about employee engagement, policy effectiveness, and insurer profitability. Use ICR insights to tailor your corporate health insurance strategy:

• Advocate for fair premium adjustments.
• Address claim process awareness gaps.
• Negotiate benefits that align with employee needs while controlling costs.

Mastering the art of ICR analysis will position you as a strategic partner—not just an HR policy administrator. The more you know, the better equipped you’ll be to drive smarter, more impactful health benefits for your workforce.