Irdai Flags Misleading Claim-Settlement Ads By Insurers

India’s insurance regulator, Irdai, has raised a red flag over the way several insurers are promoting their claim settlement performance. Over the past year, Irdai has observed a growing trend of advertisements that showcase exceptionally high settlement ratios, despite the official numbers reported to the regulator telling a more mixed story. The concern is straightforward: policyholders may be forming opinions based on figures that have been polished for marketing purposes rather than presented in a standard, comparable format, according to a recent report by The Economic Times.

Regulator Says Glossy Ratios Don’t Match Audited Figures

The gaps primarily arise from the calculation method used for settlement ratios. Different insurers use different bases. Some count only the claims they consider “payable,” leaving out those that were rejected or are still under review. Others rely on variations of “assessed” or “reported” claims. The result is a set of numbers that look impressive on billboards but do not match the audited figures in their annual disclosures.

Inside The Numbers: What Insurers Really Settled In 2023–24

Actual industry data for 2023–24 shows a more balanced picture. Around 83 per cent of claims were settled in number. Roughly 11 per cent were rejected for reasons ranging from documentation gaps to terms not covered under the policy, and another six per cent remained pending at the end of March. In the health insurance segment specifically, insurers processed nearly 2.7 crore claims and paid out approximately Rs 83,493 crore. The average payout per claim stood a little above Rs 31,000, which indicates that most claims were relatively small, routine reimbursements rather than large hospitalisation cases.

To address the inconsistencies, Irdai has requested that insurers provide a single, sector-wide method for computing settlement ratios. This standard will apply to all major business lines, including health, motor, fire, marine, and personal accident. The aim is to ensure that the numbers insurers put out in public are comparable, easy to understand, and aligned with audited data, not shaped by individual marketing preferences.

Behind The Percentage: What Consumers Really Need To Know

Industry executives recognise the confusion that arises from the current patchwork of methods, even if they argue that many rejections are unavoidable and stem from contract conditions. Irdai, however, believes that simply publishing one headline ratio is not enough. Consumers need context—how long claims take to be processed, how many claims run into paperwork issues, and how often benefits are denied for contract-related reasons. These details, currently absent from most advertisements, influence the real experience far more than a single percentage figure.

For policyholders, the regulator's move serves as a reminder to look beyond glossy claims. A high settlement number is useful but not definitive. With a common formula on the way, comparisons among insurers should become clearer, reducing the chances of consumers being swayed by numbers that have been presented in the best possible light rather than in the most transparent one.