
The government has undertaken insurance sector reforms to ensure Insurance for All by 2047. The aim is to ensure every citizen has appropriate life, health and property insurance. Achieving this requires the effective participation of the private sector.
However, unless the regulator addresses the issue of high claim rejections, especially by private health insurers, the goal of achieving high insurance penetration will remain elusive.
Of late, the high claim rejections by private health insurers has become a significant talking point. The IRDAI data shows private insurers rejected/disallowed, on average, claims worth Rs 22 for every Rs 100 they received in FY2024.
The value of claims denied in FY2024 grew by 19 percent. The insurers disallowed claims worth around Rs 15,000 crore (a growth of 18 percent year-on-year) as per ‘terms and conditions of policy contract’. It means denying policyholders’ claims, citing issues like non-disclosure of specific ailments or the existence of diseases excluded under the policy.
Individual policyholders, especially in a particular age group (45 plus), are taken for a ride by private health insurers. Rejections owing to pre-existing conditions are commonplace. Insurance companies are not always upfront about exclusions while selling a policy to prospective customers.
They hide certain policy conditions under the veil of jargonised policy documents. Rampant mis-selling—selling products that are not suitable for an individual or family—is a reality, and that has only helped increase the distrust between policyholders and the insurance sector.
Given that government insurance schemes are limited to a specific section of people, and corporate India offering very limited health coverage to its employees, most Indians depend on individual health policies from the private sector.
However, growing distrust between insurers and policyholders is only worsening the situation. Notably, 40 percent of the healthcare expenses in India are borne through out-of-pocket costs. Given the healthcare inflation, Indian middle class is one medical emergency away from deep financial crisis.
Niti Aayog had proposed a health insurance scheme for covering 30 percent of the population neither protected by government schemes nor by private health insurance. The government and the regulator must also urgently address high claims rejections by private insurers to achieve better health insurance penetration in India.