20 Indian Health Insurers Struggle with Claim Payouts

In a concerning revelation for health insurance policyholders, a new report indicates that 20 private health insurers in India paid less than 80% of the total amount claimed by insured patients in 2023. The analysis, published by the Insurance Brokers Association of India (IBAI) and covered by The Indian Express, sheds light on significant disparities in the claim payout performance across public and private health insurers.

The findings suggest that if a policyholder claimed ₹1 lakh for hospital expenses, private insurers reimbursed less than ₹80,000 on average, leaving the insured to bear a substantial financial burden. This trend raises questions about the reliability of private insurers in fulfilling their promises of financial protection during medical emergencies.

Public Insurers Lead in Claim Payout Ratios

Public sector insurers emerged as more reliable in settling claims, with New India Assurance leading the pack. The company recorded a remarkable 98.74% claim payout ratio, followed closely by Oriental Insurance at 97.35%.

These figures indicate that public insurers consistently pay out nearly the full amount claimed, instilling confidence among their policyholders. Speaking on the findings, a senior industry analyst remarked, “The consistency in payout ratios among public insurers reflects their stronger regulatory oversight and customer-centric approach. However, the challenge is ensuring private players match these standards.”

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Private Insurers Fall Behind

In stark contrast, some of the leading private insurers reported notably lower payout ratios. HDFC Ergo settled only 71.35% of the claims, while ICICI Lombard lagged further behind at 63.98%. The disparity highlights an urgent need for private insurers to improve their claim processing frameworks.

Even among private players, the performance varied widely. Only four insurers—Aditya Birla Health (94.52%), Iffco Tokio (91.70%), Bajaj Allianz (90.29%), and New India Assurance (95.04%)—achieved a claim-paid ratio exceeding 90% in terms of the number of claims processed.

Alarming Trends in Claim Denials

The report also underlines a troubling trend in claims repudiation. Across 23 insurers, mostly private, denial rates ranged between 5% and 18%. Such high repudiation rates leave policyholders vulnerable, often during times of critical need.

An industry expert observed, “High repudiation rates not only erode customer trust but also create financial stress for families. Insurers must invest in simplifying claim processes and ensuring transparent communication with policyholders.”

Industry-Wide Snapshot

Data from the Insurance Regulatory and Development Authority of India (IRDAI) offers a broader perspective on the health insurance landscape. Between 2022 and 2023, general and health insurers collectively settled 2.36 crore claims, disbursing ₹70,930 crore. The average payout per claim stood at ₹30,087, with 56% of claims processed via cashless mechanisms and the remaining 42% through reimbursements.

While these figures highlight the scale of the industry, they also underscore its inefficiencies. Private insurers, in particular, face growing scrutiny over their inability to provide equitable financial support.

Need for Reform

The findings have sparked calls for policy reforms and stricter oversight. Experts argue that bridging the gap between public and private insurers is critical for a healthier insurance ecosystem. Enhanced transparency, improved grievance redressal mechanisms, and increased focus on cashless settlements could go a long way in restoring policyholder confidence.

For now, policyholders are advised to scrutinize the claim payout records of insurers before choosing a policy. As one policyholder aptly put it, “Health insurance is meant to provide peace of mind, not additional stress. Insurers must remember that every claim represents someone’s medical emergency.”