Health insurance claims jump 21% in FY25, but settlements lag

An amount of Rs 1.18 lakh crore was mobilised as health insurance premium in FY25 compared with Rs 1.08 lakh crore in the previous year, according to the General Insurance Council.

Irdai recently spoke about the gap in health claims and the amount settled. “In health insurance, we continue to see the gaps. While the number of claims settled is high, the amount settled, especially in full, is sometimes lower than expected. This is an area we are monitoring closely,” Irdai Chairman Ajay Seth said in his comments on the Bima Lok Pal Day recently.

“Our expectation from the insurers is clear, prompt, fair and transparent claim settlement, anything less weakens the trust on which our industry is built,” Seth said.

ICR is the actual payout on claims made by insurance companies compared to the premium collected. It was the highest for public sector companies at 103 per cent and 88.71 per cent in the case of private sector insurers. However, standalone health insurers’ ICR is low at 64.71 per cent, according to the Irdai Annual Report for FY24.
This shows public sector insurers shelled out more than what they collected as premium to settle claims. SAHIs collected Rs 37,528 crore as premium towards health insurance in FY25.

Health insurance growth slower

A major reason for the slow growth in health insurance is the sharp rise in premiums, triggered by medical inflation and high claim status. Earlier this year, Irdai directed insurers against revising the premium on health cover products for senior citizens by over 10 per cent in a year. This follows a sharp hike in health premium by over 50-60 per cent by insurers for senior citizens. Some insurers even resorted to a 100 per cent hike in premiums.

The rise in health insurance premiums can be attributed to several factors. According to the industry data, the average cost of healthcare services has increased by over 14 per cent over the past year, driven by advancements in medical technology and rising labour costs. Additionally, the growing prevalence of lifestyle diseases, such as diabetes and hypertension, has resulted in a higher number of claims, said the CEO of an insurance firm.
According to insurance brokerage firm Howden India, over two-thirds (67 per cent) of businesses are now investing in preventive healthcare to tackle soaring medical inflation.

Hurdles to cashless claim settlements

Irdai had asked insurers to go for cashless settlement of health insurance claims from August 1, 2024, making hospital bill settlement for policyholders smoother and faster. While insurers are tightly regulated by Irdai, hospitals operate without any regulatory oversight, leaving the regulator powerless to rein in their actions. Over the past three years, medical inflation was above 14 per cent with hospitals relentlessly hiking treatment charges across the board, pushing quality medical care out of reach for a large section of the population. Some insurers had cut down claim demand and even rejected claims amid the rise in medical costs.

The average amount paid per claim was Rs 31,086 in FY24, according to Irdai. In terms of the number of claims settled, 72 per cent of the claims were settled through TPAs (third party administrators) and the balance 28 per cent were settled through in-house mechanisms. In terms of mode of settlement of claims, 66.16 percent of total claims were settled through cashless mode. Another 39 per cent were settled through reimbursement mode in FY24.