Health insurers get back in shape post Covid low

MUMBAI: The health insurance industry is at its soundest in the five years since the pandemic, with the industry-wide incurred claims ratio (ICR) falling to a post-Covid low of 86.9% in FY25, data shows.

What ICR means is that for every Rs 100 that insurers collected as premium, they attracted Rs 86 of claims in that years, leaving them with an underwriting margin of Rs 14.

The claim ratio would have been better but for the group health business, which accounts for 55% for total health insurance in the country, where the claims ratio is consistently above 92%.

The stress is most evident among public sector insurers, which dominate the group insurance market. In FY25, PSUs collected Rs 25,623 crore in group premiums but paid out Rs 26,548 crore in claims, translating into an underwriting loss of Rs 925 crore according to the handbook on insurance statistics released by the insurance regulator. Their group claims ratio stood at 103.61%, compared with 87.79% for private insurers and 67.74% for standalone health insurers.

According to insurers, the larger the corporates the better their bargaining power. This has resulted in individual covers subsidising the group health business for large corporates considering that the combined ratio (which includes the ratio of claims and management expenses to total premium) is in excess of 100% for group business.

At the height of the pandemic in FY22, the industry's overall incurred claims ratio had surged to 109.12%, implying insurers were paying out more in claims than they earned in premiums. Since then, following price revision claims ratios have steadily moderated-dropping to 88.89% in FY23, 88.15% in FY24, and further to 86.98% in FY25 despite medical inflation gathering significant pace after the pandemic.