Claims, complaints, coverage: India's health insurance story

Convoluted procedures, issues with claim fulfilment and high premiums have put health insurance beyond the reach of a majority of Indians

New Delhi: Arumugam, a resident of Chennai, was recently diagnosed with acute appendicitis. For a surgery at a private multi-superspeciality hospital in Chennai, his insurance company gave cashless approval up to Rs 55,000. While he was being operated on for appendicitis, doctors found the need to perform another surgery to remove an additional patch near his small intestine. He was asked to pay Rs 1.2 lakh from his pocket. “I was asked to apply for reimbursement, and was made to run from pillar to post. It took multiple hospital visits and loads of work to get the documents collected. But finally, my claim was rejected,” Arumugam said.

Arumugam filed several appeals with the insurance provider, but to no avail. “Despite paying a premium of Rs 12,000 each year, my ailment was not covered, and my claim was rejected,” Arumugam said.

For the average policyholder, such hassles in claim processing are far from rare. According to a recent report by Insurance Samadhan, a tech-based grievance redressal platform, around 88 per cent of complaints by health insurance policyholders are related to claim rejection. The reasons for claim rejection range from policy exclusions and limitations to procedural violations and non-disclosures. 

Insurance penetration in India is among the lowest in the world. Measured as a ratio of annual premium to the country’s gross domestic product (GDP), insurance penetration declined from 4 per cent in 2022-23 to 3.7 per cent in 2023-24, according to the Insurance Regulatory and Development Authority (IRDAI). Insurance penetration peaked at 4.2 per cent in 2021-22, in the wake of the Covid pandemic. Even then, insurance coverage remains dismally low.

Another policyholder, Sathish Kumar, described how he was forced to spend hours filling forms that ran into around 20 pages, for insurance concerning his wife’s acute viral fever treatment. 

A Anusha, a senior manager at a public sector bank in Hyderabad, has a similar story to tell. Her insurance claims for a family member’s surgery were partly rejected due to “non-disclosure” of a medical condition that was neither diagnosed nor known to the family when they purchased the policy. “I provided complete information to the best of my knowledge during enrollment, yet the company claimed we concealed information,” she said. 

Perhaps more concerning was her discovery that, “the fixed package arrangement between the company and the hospital significantly compromised treatment quality. Our doctor admitted that certain recommended procedures and medications were substituted with less effective alternatives to comply with the insurance company’s pre-approved package limitations. This corporate arrangement should never take precedence over proper medical care.”

Adding to this were the trials of long delays and a heavy administrative burden. “Most distressingly, during discharge, we were forced to wait for over eight hours due to delays in claim approval. This also resulted in additional hospital charges for extended stay, which the company refused to cover. We had to pay these charges out-of-pocket despite having a supposedly comprehensive insurance policy,” the banker added.

Earlier this year, for treatment at Lilavati Hospital in Mumbai, Bollywood actor Saif Ali Khan reportedly claimed around Rs 36 lakh. His insurer swiftly approved Rs 25 lakh. In medico-legal cases, insurance companies normally ask for a copy of the first information report (FIR) and other details before approving claims. Saif Ali Khan’s claim, however, was processed and approved within hours of submission, according to news reports.

Raising concern over the preferential treatment extended to the actor, the Mumbai-based Association of Medical Consultants said, “This instance highlights a troubling trend where celebrities and high-profile individuals and patients with corporate policies receive favourable terms and high cashless treatment limits, while ordinary citizens struggle with insufficient coverage and low reimbursement rates.”  

“Insurance should be a safeguard for all, irrespective of social status. Preferential treatment based on celebrity status creates a two-tier system, which is discriminatory against ordinary policyholders,” they said in a letter to IRDAI.

Insurance for all

Universal health insurance coverage can play a critical role in achieving the health-related sustainable development goals. Dr Anmol Agarwal, principal consultant, Department of Oral, Dental and Maxillofacial Care at Delhi's Yashoda Super Speciality Hospital, argued that health insurance could be made mandatory for everybody. “The moment a child is born, he or she can be issued a health insurance policy before getting discharged from the hospital. This will not only keep the health insurance premiums low, but create a sense of responsibility both ways,” he added.

There are various economic and social factors that continue to have an impact on access to insurance in India. “The per capita income in India is on the lower side for the masses. With increasing inflation, necessities have grown dearer. So the priorities are physiological needs, consumption, savings and after that, there is not much left for insurance,” said Shashi Kant Dahuja, executive director and chief underwriting officer of Shriram General Insurance. 

While creating awareness of the importance of insurance is a priority, low-cost insurance options are also vital, he added. “The cost should be affordable to the middle class, and for this, standard health insurance products can play an important role.”

The Ayushman Bharat scheme, which was launched in September 2018 by the Union government, seeks to provide health insurance coverage for the 40% of individuals with the lowest income in the country.

As per the Economic Survey 2024-25, the scheme has led to a significant decline in out-of-pocket expenditure on healthcare. The share of out-of-pocket expenditure in the total health expenditure declined to 39.4% in 2021-22 from 62.6% recorded in 2014-15. In 2017-18, the fiscal year before the launch of Ayushman Bharat, the share of out-of-pocket expenditure stood at 48.8%.

The declining trend in out-of-pocket expenditure is also reflected in World Bank data, though the figure is significantly different from the government’s claims. As per the World Bank, the share of out-of-pocket expenditure in the total health expenditure in India declined to 45.98% in 2022 from 67.01% in 2014. In 2018, it stood at 52%.

Limited financial literacy, trust deficit and complex product structures are among the key reasons for low insurance penetration in the country, said Rakesh Jain, CEO, Reliance General Insurance.

“Affordability and accessibility in rural and semi-urban areas are still a challenge. Many see insurance as an expense rather than a safety net. Additionally, the informal economy’s dominance makes premium-based products unattractive,” Jain said.

IRDAI guidelines 

As per a master circular on the protection of policyholders’ interests released by the IRDAI last year, cashless claims must be authorised within one hour of receipt of the request. The insurer shall grant final authorisation within three hours of the receipt of the discharge authorisation request from the hospital. In no case shall the policyholder be made to wait to be discharged from the hospital, IRDAI noted in the circular.

If there is any delay beyond three hours, the additional amount, if charged by the hospital, shall be borne by the insurer from the shareholders’ fund.

Under the cashless facility, insurance companies or Third Party Administrators (TPAs) make payments directly to hospitals. Cashless claim is possible only if you receive treatment at a hospital within the network of the TPA servicing your policy.

Policyholders can also get claims fulfilled on a reimbursement basis. This refers to a situation where the policyholder pays for the medical expenses upfront and later gets repaid by the insurance company. 

Option to cancel policy

For some health insurance policies, with a minimum term of three years, a policyholder has the option to return the policy within 30 days. This period is referred to as the ‘free look period’. 

“A period of 30 days (from the date of receipt of the policy document) is available to the policyholder to review the terms and conditions of the policy. If he/she is not satisfied with any of the terms and conditions, he/she has the option to cancel his/her policy,” IRDAI noted in its master circular on health insurance business. 

Issues in claim settlement

Broadly, the reasons for rejection in claim settlement relate to “non-disclosure of relevant information”, policy exclusions and procedural mistakes.

“The high volume of complaints related to health insurance claims stems from a lack of clarity in policy terms, insufficient communication, and complex documentation,” said Jain.

A lot of people still do not understand the insurance conditions and jargon, said Dahuja. “Insurers are taking initiatives to simplify products and policy wording. To address issues related to claims settlement, we need to make policyholders aware about the issues like coverage, waiting periods and exclusions in easy language,” he added.

“Delays may come from the policyholders’ end, when they do not submit necessary documents such as discharge summaries,” said an insurance agent based in Mangaluru.

“Sometimes, the hospital might also delay submitting the pre-authorisation forms for cashless claims, which will impact when the claim is processed. If there are government holidays after the form is filed, that will also delay the process,” he explained.

However, in many cases, bizarre questions and delays have been common, despite documents being submitted upfront — from the hospital, the bank, and the policyholders and their families.

In one such case, an insurance agent asked a policyholder to show their Google Maps history, for a claim relating to her husband’s fractured arm after an accident. Her daughter, a chartered accountant, explained, “The agent asked my mother to provide this as proof that the claims and invoices from the hospital where my father was admitted were not fraudulent. She said she could not provide Maps history, and he agreed.”

Some insurance companies adopt different tactics to delay or refuse payments, said Thrissur-based advocate A D Benny, who specialises in consumer cases.“In many instances, once the aggrieved person approaches consumer courts, the insurance firms will initiate mediations and make flat settlements without paying any interest component,” he said.

Mis-selling is also a major threat to both insurers and policyholders. “Insurance is based on good faith and trust. Mis-selling breaks that trust. It creates wrong expectations in the minds of policyholders. Obviously, when these expectations are not met, policyholders blame insurance companies, leading to dissatisfaction and discontinuation of the policy,” said Dahuja. 

For instance, a client may be sold health insurance by an intermediary, in which there is a specific waiting period of two years. If the intermediary has not talked about the waiting period and diseases for which this applies, it is a case of mis-selling, explained Dahuja. “Now, if a client suffers from hernia, for example, after a year, and files a claim which is rejected due to the waiting period, this leads to loss of faith in the insurer,” he added.

To address these issues, according to Jain, “Insurers must focus on transparency at the time of sale, simplify claim processes and ensure customer education.” Real-time claim tracking, prompt grievance redressal and digital documentation can further streamline approvals. Regulatory push for standardisation and stricter action against mis-selling can also help restore policyholder trust.

(With inputs from Arjun Raghunath in Thiruvananthapuram, E T B Sivapriyan in Chennai, Mrityunjay Bose in Mumbai, S N V Sudhir in Hyderabad and Udbhavi Balakrishna in Bengaluru)