Smart Buyers Look at These 6 Insurance Ratios

Insurance Ratios: Buying insurance isn’t just about picking the lowest premium or highest coverage. It’s about trusting a company to protect your future.
Yet, behind the brochures and benefit tables are numbers that truly reflect how reliable and fair an insurance provider really is.

Regulators, analysts, and financial planners use insurance performance ratios to assess how well insurers handle claims, manage money, and treat customers. If you’re buying life, health, or general insurance, these numbers are the real indicators of trustworthiness—not just glossy marketing.

Let’s break down six essential insurance ratios that can help you make smarter, safer decisions.

1. Claim Settlement Ratio (CSR)

What it means: The percentage of claims an insurer successfully pays out in a year.
Why it matters: A high CSR—usually above 95%—means the insurer is reliable when it comes to paying claims.

Example: A CSR of 98% means 98 out of 100 claims were paid.
Tip: Always check this before buying a life or health policy.

2. Incurred Claim Ratio (ICR)

What it means: This applies to health and general insurance. It compares total claims paid versus total premium collected.
Ideal range: 70%–90%.

• Too low (<70%): The company may be rejecting more claims.
• Too high (>90%): The company might be at financial risk.

Why it matters: It shows whether the insurer balances claim payments while staying financially healthy.

3. Solvency Ratio

What it means: This ratio shows whether the insurer has enough funds to pay all claims—even during a crisis.
IRDAI minimum requirement: 1.5.

Why it matters: A solvency ratio above 1.5 means the insurer can handle sudden large-scale payouts, like during a natural disaster or pandemic.

4. Persistency Ratio

What it means: The percentage of policyholders who renew their policies.
Why it matters: A high persistency ratio shows customers are satisfied and continue trusting the insurer.

Example: A 13th-month persistency ratio of 80% means 8 out of 10 customers renew after the first year.
Tip: This is especially important when buying long-term life insurance.

5. Expense Ratio

What it means: The portion of premium income spent on business costs like commissions, salaries, and advertising.

Why it matters: A high expense ratio means less of your money goes toward actual coverage or benefits.
Tip: Insurers with lower expense ratios are often more efficient—and may offer better value.

6. Grievance Ratio

What it means: The number of complaints per 10,000 policies sold.

Why it matters: A low grievance ratio means fewer customer complaints—and often better customer service.
Tip: You can find this data in IRDAI’s annual reports. Use it to avoid insurers known for delays or bad claim practices.

Why These Ratios Matter More Than the Brochure

Insurance is a long-term financial contract. While premiums and policy features are important, these six ratios give you a deeper view into an insurer’s real-world performance:

• Claim Settlement Ratio – Are they paying out claims?
• Incurred Claim Ratio – Are they fair and financially stable?
• Solvency Ratio – Can they pay during crises?
• Persistency Ratio – Do customers trust them?
• Expense Ratio – Are they efficient?
• Grievance Ratio – Do they treat customers well?

Looking beyond marketing and focusing on these key metrics can help ensure that your policy not only covers you on paper—but truly protects you when it matters most.

Also Read: Pramerica Life Insurance Sets New Standard with 99.18% Claim Settlement Rate