How Routine Claims Become Soft Targets For Health Insurance Fraud

Health insurers are increasingly alarmed by the rise of fraud in small and mid-sized claims, especially those under Rs 50,000, a segment traditionally treated as low-risk and therefore lightly scrutinized, according to a recent report by The Economic Times. An industry study by Medi Assist and BCG shows that this band, along with claims up to Rs 2.5 lakh, has quietly become the most vulnerable to manipulation.

Why Small Claims Have Become Easy Targets

Insurers say the incentives are obvious. In this bracket, claim amounts are just high enough to matter, yet not so large that they automatically raise red flags. That grey zone creates room for quiet inflation. Since many routine procedures already sit comfortably within standard hospital tariffs, it becomes easy for a provider to tack on a few extra tests, bump up the cost of consumables, or upgrade a minor treatment into a more expensive category without drawing immediate scrutiny. Because documentation requirements are limited, these claims move quickly through the system, and fraudulent entries slip through just as easily.

Industry data suggests that about eight to 10 per cent of overall payouts vanish each year due to fraud, waste, and abuse. In value terms, this leakage is estimated at Rs 8,000–10,000 crore annually. Insurers warn that this directly hits their bottom lines and keeps premiums elevated for honest customers.

Another red flag is the growing misuse of digestive-related ailments. These cases often hinge on how a patient describes their symptoms, rely on several rounds of tests, and typically don’t need pre-authorisation. Put together, that mix leaves a lot of room for providers to stretch the details or add on investigations without immediate pushback.

Infectious diseases, too, show high misuse potential because of their vague presentations and heavy reliance on lab testing. Bills in such cases are harder to contest, and many insurers report unusual spikes in claims in this category.

The New Hotspot: Sub-Rs 50,000 Claims

Interestingly, the smallest claims, those below Rs 50,000, have also emerged as a new hotspot. These usually clear with bare-minimum paperwork. Insurers have found repeated instances where minor services were billed but never delivered, consumables were marked up disproportionately, or multiple small claims were filed strategically to avoid detection. Fraud in this bracket has climbed steadily over the past three years.

What makes the issue harder to control is behavioural acceptance in parts of the ecosystem. Because individual gains from small fraud appear trivial and the risk of being caught is perceived as low, misuse has normalised over time. Insurers fear that this culture weakens trust and quietly adds cost pressure across the board.

On the other hand, surgical claims tend to be cleaner. These require prior approval, involve several specialists, and generate a detailed paper trail, reducing the scope for fabrication. The industry expects that better digital audits, pre-claim risk scoring, and integrated data systems will be crucial to curb leakages.

Insurers now say the biggest challenge is not catching large frauds but plugging the everyday, low-value cases that collectively bleed the system.