Incurred Losses

Incurred losses represent the total losses that an insurance company has actually experienced during a specific accounting period — including losses that have been paid out to claimants and losses that have been reported but not yet paid (IBNR — Incurred But Not Reported losses that have occurred but are yet to be formally filed). The incurred loss ratio — calculated as incurred losses divided by earned premiums — is the primary profitability metric for general insurance companies, measuring how much of each rupee of premium collected is consumed by claim payments. A loss ratio above 100% means the insurer is paying out more in claims than it is collecting in premiums — indicating underwriting losses before operating expenses are considered. In India, general insurance companies regulated by IRDAI disclose incurred loss ratios by business segment — motor insurance, health insurance, fire, marine — in their annual reports and financial statements. For equity investors analysing Indian general insurance stocks such as New India Assurance, Star Health, and ICICI Lombard, the incurred loss ratio trend is the most important profitability indicator — rising health insurance claim ratios post-COVID and volatile motor insurance loss ratios significantly affected the valuations of listed insurance companies. The combined ratio (loss ratio plus expense ratio) measures total underwriting profitability — a combined ratio below 100% indicates profitable underwriting, while above 100% means the insurer relies on investment income to achieve overall profitability.