Health Insurance Claims in India: Rising Rejections, Delays, and Recommendations for Reform
Health insurance, a cornerstone of financial planning and healthcare accessibility, is facing serious challenges in India as claim rejection rates rise and policyholders struggle with delays in settlement processes. A comprehensive survey conducted by LocalCircles underscores these issues, shedding light on systemic problems that demand immediate attention from both insurers and regulatory authorities.
A Grim Picture: High Rates of Rejections and Partial Approvals
According to the LocalCircles survey, over 50% of health insurance policyholders who filed claims in the last three years experienced either rejections or partial approvals. Only 25% of claims were fully approved on the first submission, while an additional 6% managed to secure approval only after extensive follow-ups. Alarmingly, 33% of respondents reported receiving partial approvals with “invalid reasons,” and 36% faced outright rejections.
These figures highlight widespread dissatisfaction and a troubling disconnect between policyholder expectations and insurer practices. Despite directives from the Insurance Regulatory and Development Authority of India (IRDAI) to expedite claims processing, many claims remain unresolved for extended periods.
Delays in Claim Settlement Impacting Hospital Discharges
One of the survey’s most concerning revelations was the significant delays in settling claims, which directly affect the time taken for hospital discharges. Among the policyholders surveyed,
- 21% reported discharge times of 24-48 hours post-claim approval,
- 12% faced 12-24 hour waits,
- 14% had to wait 9-12 hours, and
- 12% experienced a 6-9 hour delay.
Only 8% of claims were processed instantly, reflecting the gap between the IRDAI’s expectation of swift settlements—some within an hour—and ground reality.
These delays place undue stress on patients and their families, who are often dealing with medical crises. The absence of efficient, transparent communication further exacerbates the situation.
Call for Web-Based Communication Systems
A notable majority of respondents to the LocalCircles survey emphasized the lack of transparent, web-based platforms for claim processing and settlement. This absence makes it challenging for policyholders to track their claims and understand their status in real-time. The survey calls for the IRDAI to mandate such systems, which would improve transparency, streamline processes, and minimize disputes.
Health Insurance Industry: Troubling Trends in FY24
The IRDAI’s recent annual report paints an equally concerning picture of the health insurance landscape. In FY2024, India’s insurers rejected claims amounting to Rs 26,000 crore, a significant 19.10% increase from the previous year’s Rs 21,861 crore.
Breaking down these figures:
- Claims disallowed: Rs 15,100 crore (up from Rs 12,754 crore in FY2023)
- Claims repudiated: Rs 10,937 crore (up from Rs 9,107 crore in FY2023)
This surge highlights a rising trend in claims rejection and repudiation, driven by factors such as documentation errors, misinterpretation of policy terms, and procedural inconsistencies.
Difference Between Claim Rejection and Repudiation
To clarify:
- A rejection occurs when an insurance company deems a claim invalid due to documentation errors or non-adherence to terms.
- Repudiation, on the other hand, follows a review process where the claim is denied because it does not align with the policy’s terms and conditions.
Claim Settlement Ratios: Measuring Insurer Performance
The claim settlement ratio (CSR), a key metric of an insurer’s reliability, measures the number of approved claims against the total received in a specific period. A CSR above 85% is generally seen as favorable.
In FY2023-24, among private sector insurers:
- HDFC Ergo led with a CSR of 94.32%, indicating strong reliability.
- Bajaj Allianz, however, recorded the lowest CSR at 73.38%, reflecting potential concerns in its claim-handling practices.
While high CSRs are reassuring, the disparities among insurers underscore the inconsistency in customer experiences across the health insurance sector.
Policyholder Recommendations: The Way Forward
The LocalCircles report outlines actionable suggestions for improving the state of health insurance in India. These include:
- Mandatory Web-Based Claim Systems: The IRDAI should require all insurers to implement online portals where policyholders can submit, track, and dispute claims.
- Standardized Settlement Timeframes: Ensuring stricter adherence to time limits for claim settlements to alleviate hospital discharge delays.
- Transparency in Approvals and Rejections: Insurers must provide clear, valid reasons for rejections or partial approvals, reducing the need for prolonged disputes.
- Customer-Centric Policy Terms: Simplifying policies and terms to minimize misinterpretations and enhance customer confidence.
- Awareness Campaigns: Educating policyholders on proper documentation and procedures to avoid preventable claim denials.
A Hope for Change
The LocalCircles report and survey findings have been shared with the IRDAI and other stakeholders to advocate for systemic reforms. While some insurers have demonstrated efficiency and reliability, the sector as a whole requires structural improvements to regain customer trust and ensure a more equitable claims experience.
Conclusion
Health insurance is intended to provide financial relief during medical emergencies, but the current system often leaves policyholders frustrated and underserved. With rising claim rejections, delays, and opaque processes, urgent reforms are necessary to restore confidence in health insurance services in India. The IRDAI must take decisive action, incorporating stakeholder recommendations and enforcing stricter regulatory oversight, to ensure that health insurance fulfills its intended purpose effectively and equitably.
