Before You Buy Insurance, These Are the Numbers That Really Matter
Choosing an insurance policy isn’t just about finding the lowest premium or highest coverage amount. The true strength of your insurance rests on the insurer’s credibility, reliability in settling claims, and ability to stay solvent when you need them most. Here are the essential numbers and ratios every insurance buyer should review:
1. Claim Settlement Ratio (CSR)
Definition: The percentage of claims an insurer settled versus total claims received in a year.
Benchmark: Look for a CSR above 95%. The higher the ratio, the greater your likelihood of a hassle-free claim process.
Why It Matters: This figure reflects the insurer’s reliability.
2. Incurred Claim Ratio (ICR)
Definition: For health and general insurance, this shows how much the insurer paid in claims against premiums collected.
Healthy Range: 70%–90% is ideal. Too high = potential financial stress. Too low = possible frequent claim denials.
Why It Matters: Indicates both claim-paying willingness and financial health of the insurer.
3. Solvency Ratio
Definition: Measures the insurer’s ability to meet long-term obligations, calculated as the ratio of available solvency margin to required solvency margin.
Regulatory Requirement: Should be at least 1.5, as per IRDAI norms.
Why It Matters: Ensures the insurer can pay claims even in large-scale emergencies or volatile markets.
4. Persistency Ratio
Definition: The percentage of policyholders who renew their policies each year.
Interpretation: Higher persistency (above 70–80%) indicates customer satisfaction and trust.
Why It Matters: Shows long-term customer relationships, a marker for product and service quality.
5. Expense Ratio
Definition: Total expenses divided by total premiums collected.
Significance: A lower ratio suggests the insurer manages its expenses well, often leading to competitive premiums.
Why It Matters: Higher expenses can impact profitability and claim servicing in the long run.
6. Loss Ratio
Definition: The total sum paid in claims as a percentage of total premium revenue.
Assessment: A normal range signals balanced risk; very high or low values may flag issues in pricing or underwriting quality.
Essential Summary Table
| Metric | What to Check | Why It Matters |
|---|---|---|
| Claim Settlement Ratio (CSR) | Above 95% | Ensures claims are paid promptly |
| Incurred Claim Ratio (ICR) | 70%–90% | Insurer is active & stable |
| Solvency Ratio | At least 1.5 (or higher) | Ability to meet claims in crisis |
| Persistency Ratio | Higher than 70–80% | Indicates customer trust |
| Expense Ratio | Lower is better | Indicates insurer’s efficiency |
| Loss Ratio | Within normal industry ranges | Balanced risk/pricing |
Frequently Asked Questions
What is the most important ratio to check before buying insurance?
Claim settlement ratio is a vital metric; aim for insurers above 95% for best reliability.
Why is the solvency ratio significant?
It shows whether an insurer can handle large claim payouts and remain financially stable, especially during crises.
What indicates an insurer's efficiency?
A low expense ratio and a balanced incurred claim ratio are marks of an efficient insurer.
Does a high claim settlement ratio guarantee smooth claims?
It is a strong indicator, but always review several years’ data and other factors like persistency, solvency, and customer service track record.
Should I care about persistency ratio?
Yes. A high persistency ratio reflects satisfied customers who continue renewing their policies, indicating trust and proper servicing.
How can I find these numbers?
Most of these key ratios and metrics are disclosed in insurers’ annual reports or regulator (IRDAI) statistics. Compare before buying any policy.
Published on: July 22, 2025
Published by: PAVAN
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