Health Insurance Payouts Rise Slower Than Claims Allude To Inefficiencies In Settlement: IRDAI Data

New Delhi, Nov 24 (KNN) India’s health insurance sector is witnessing a sharp rise in claims even as the gap between claims filed and amounts settled continues to widen, according to the latest data from the Insurance Regulatory and Development Authority of India (IRDAI).

Health insurance claims surged 21.18 percent in FY25, with insurers settling 3.26 crore claims and paying out Rs 94,247 crore, IRDAI data shows. 

In comparison, FY24 saw 2.69 crore claims settled with payouts worth Rs 83,493 crore, reported IE.  

However, the amount settled grew only 12.88 percent, highlighting rising healthcare costs, higher utilisation, and potential inefficiencies in claim settlement.

Premium collections also rose, with insurers mobilising Rs 1.18 lakh crore in health insurance premium in FY25, up from Rs 1.08 lakh crore a year earlier, according to the General Insurance Council.

IRDAI Chairman Ajay Seth recently flagged concerns over the mismatch. “While claim volumes are high, the amounts settled, especially fully settled claims, remain lower than expected. We are monitoring this closely,” he said, stressing the need for ‘prompt, fair and transparent claim settlement.’

The FY24 incurred claims ratio (ICR) data revealed significant differences across sectors. Public sector insurers reported an ICR of 103 percent, indicating they paid out more in claims than they collected in premiums. 

Private insurers recorded an ICR of 88.71 percent, while standalone health insurers (SAHIs) reported a much lower ICR of 64.71 percent, reflecting comparatively healthier claim-premium dynamics within the SAHI segment.

Industry executives noted that medical inflation, above 14 percent for three consecutive years, and an increase in lifestyle-disease-related claims have pushed insurers to raise premiums sharply. 

Some senior citizens reportedly faced premium hikes of 50–100 percent, prompting IRDAI to direct insurers not to increase rates by more than 10 percent for this segment in a year.

IRDAI has mandated insurers to move towards cashless claim settlement from August 1, 2024, but challenges persist since hospitals remain outside regulatory oversight. 

In FY24, 66.16 percent of claims were settled through the cashless route, while 39 percent were processed via reimbursement. The average claim amount stood at Rs 31,086.

Insurers say uncontrolled hospital billing practices and rising treatment costs have added further stress to claim ratios, even leading some companies to reduce or deny claims.

(KNN Bureau)