Health Insurance Claims: Policyholders Still Struggle Despite IRDAI’s Directives

Indian health insurance sector is coming under the scanner with a new survey revealing the continued problems of delay in processing claims despite all the efforts from the side of Insurance Regulatory and Development Authority of India (IRDAI) to make things more streamlined. Be it extended hospital discharges or claim rejections for spurious reasons, policyholders face all these which are eating into their confidence in insurers.

Delays Persist in Claim Processing

According to a LocalCircles survey that had garnered more than 100,000 responses from health insurance policy owners spread over 327 districts in India, 6 in 10 of them who filed claims in the last three years have waited for their claims to be processed and for the hospital discharge clearances, all within a range of 6 to 48 hours. The directive from IRDAI to process cashless claims within an hour stands in stark contrast to the present situation.

For example, 21 per cent of the respondents claimed that it took 24 to 48 hours for the discharge process, and 12 per cent waited between 12–24 hours. Only 8 per cent of the respondents experienced immediate processing of their claims. The inconvenience and added stress of hospitalisation due to these delays cannot be overlooked.

High Rate of Rejections and Partial Settlements

Over 5 in 10 respondents admitted that their claims were rejected or approved partially based on reasons which were unjustifiable. It emerged that 20 per cent of claims were rejected outright and 33 per cent partially approved because the reasons were deemed unjustifiable.

One of the most common is complaints over failing to cover pre-existing conditions such as diabetes when clients were led to believe that these were actually covered. This leaves many policyholders feeling that the insurers are promising more than they are able to deliver at the time of claims.

Claims Held Back by Design

An alarming trend is that more than 8 in 10 indicate that insurance companies delay claims to exhaust the policyholders to accept smaller sums. Of those individuals, nearly 5 in 10 indicated that they experienced such claims firsthand.

For instance, many respondents narrated anecdotes of protracted waits in hospitals and were coerced into settling out-of-pocket certain claims to avoid further delays. The practice brings to question whether the settlement processes of health insurance claims have any ethical merits at all.

Transparency is The Biggest Problem

Another issue raised with the lack of transparent web-based communication systems with respect to processing claims. Now, despite what IRDAI says by saying that they demand the insurance provider to be notified at each process, it mostly uses conventional ones such as mail and calls taken from the hospitals.

83 per cent of the respondents demanded that IRDAI enforce 100 per cent web-based claims processing systems that provide real-time updates to policyholders. This would eliminate ambiguity and reduce dependence on hospital intermediaries for claim status updates.

Insurers' Performance

The claim settlement ratios of health insurers show mixed results. The Insurance Brokers Association of India reports that the private sector players had the highest settlement ratio in 2023–24 at 94.32 per cent.

The survey also highlighted that 71.3 per cent of the total claims worth Rs 1.2 lakh crore registered in FY24 received payment. Nonetheless, Rs 15,100 crore worth of claims were denied based on terms and conditions under the policy. This has thrown up red flags over the small print in insurance contracts.

Key Findings

The findings have intensified calls for regulatory reforms to protect policyholders. Here are the key demands from respondents:

1. Time-Bound Settlements

The respondents also demanded that IRDAI enforce its one-hour rule for cashless claim settlements more strictly. Delays in the approval and discharge of claims must be penalized to bring about compliance.

2. Clear Systems

Most policyholders want insurers to have clear, web-based systems for processing claims. This would enable them to track their claims in real-time, thereby reducing dependence on hospital staff and eliminating ambiguity.

3. Standardization Across Insurers

To prevent discrepancies in claim approvals, respondents recommended standardising policy terms and claim settlement procedures across insurers. This would ensure uniformity and fairness in the process.

4. Improved Grievance Redressal

Many policyholders reported difficulties in escalating issues when claims were rejected or partially approved. A robust grievance redressal mechanism, including ombudsman intervention, was highlighted as a necessity.

Impact of IRDAI’s 2024 Reforms

IRDAI had, in June 2024, rolled out reforms which include one-hour cashless claim approvals. However, the survey says that this has had a very limited impact on the ground. The delay and opaqueness of the process continued to plague the policyholders and indicated a gap between regulatory intent and implementation. Even though some of the insurers could manage to raise their settlement ratios, others lagged behind which is impacting the customer trust.

This health insurance business sector is crucial for India and the total wellness sector as an additional source of funds for millions of families. Much more is sought to be looked upon seriously as concerns in relation to this issue. Technology-based structure in claims would help address issues by ironing out the prevailing anomalies, whether through precise information regarding dealing with, transparent checks in every activity, and responsibility vested atop the list of priorities.