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In India, health insurance has emerged as a critical financial tool for managing healthcare expenses, with its coverage expanding rapidly. In 2021-22, health insurance surpassed motor insurance to become the largest segment by premiums among Indian non-life insurers. Over the past decade (2013-14 to 2023-24), health premiums collected by non-life insurers grew at an average annual rate of 18.7%, outpacing motor insurance (10.5%) and other segments (14.1%). Consequently, health insurance’s share of total non-life premiums surged from 25% to 38%.
However, this growth has been accompanied by a surge in policyholder complaints. Issues such as claim rejections, partial or delayed payments, and exclusions that were not clearly understood have fuelled dissatisfaction. Among the top 10 insurers by health premiums, most settled claims on only four out of five policies on which claims were raised in 2022-23. Yet, except for public sector insurers, most paid significantly less than the amounts claimed.
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This gap is particularly stark among insurers that exclusively operate in the health segment. For instance, Star Health, the second-largest health insurer by premiums, paid just 55% of the total amount claimed, leaving many policyholders frustrated and seeking redress through the insurance ombudsman.
Complaint desk
In 2023-24, policyholders filed 31,490 complaints related to their health insurance policies with the 17 insurance ombudsman centres across India. The majority of these grievances were linked to claims. Post-pandemic, there has been a heightened awareness of the need for health insurance, and insurers have been quick to capitalize on this opportunity. Many have ramped up marketing efforts targeted at individuals, shifting focus from group health plans traditionally sold to companies and organizations.
As of March 2024, approximately 23 million individual health policies were active, providing coverage to about 56 million individuals. Between 2019-20 and 2023-24, the number of lives covered via individual plans increased at an average annual rate of 6.6%. Average premiums increased at twice that rate. And complaints filed by policyholders—primarily individuals—also rose significantly, increasing by 31.5%.
This surge can be attributed to several factors: increased awareness of ombudsman services as a redressal mechanism, a rise in the number of policies, and the inherent tension between insurers’ dual objectives of covering health contingencies and pursuing profitability.
Ombudsman rulings
In 2019-20, the number of health insurance complaints filed with the ombudsman amounted to six per 10,000 policies. In 2023-24, this figure doubled to 13.6 complaints per 10,000 policies. Of these, about 60% related to health policies of three standalone health insurers, namely Star Health, Care Health, and Niva Bupa. Insurer-wise data on the number of policies issued is not available, but these three companies had a combined share of about 25% of health premiums.
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Legally, while ombudsman awards are directives to insurers, companies tend to abide by them. Should they choose not to, the next step of redress for policyholders is courts. In 2023-24, of the complaints disposed of by the insurance ombudsman, about 21% were awards in favour of policyholders. Another 35% were interventions of mediation, where the ombudsman asked the two sides to reach a settlement. The remaining were ruled in favour of the insurer (14%) or withdrawn (7%) or deemed not entertainable (23%).
Individuals matter
In 2023-24, the three standalone health insurers mentioned above paid claims that amounted to 55-68% of the premiums they collected. This is called the incurred claims ratio. A lower incurred claims ratio typically indicates that the insurer has effectively managed its risk profile, either by attracting a smaller share of claim-filing policyholders or by rejecting a significant portion of claims.
In the last five years, excluding the peak Covid year of 2021-22, the incurred claims of the industry has ranged between 88% and 94% of premiums collected. Within this, group policies—sold to companies and other organizations—account for 52% of premiums. Thanks to their large ticket sizes and risk pooling, the balance of power in such policies typically favours the buyer.
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In contrast, individual health policies, which currently account for 39% of health premiums, present a different dynamic. For insurers, this segment is the most profitable, with an incurred claims ratio of 75% in 2023-24. However, it also requires careful management of policyholder expectations and the implementation of robust checks and balances.
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