Insurance claims: Insurance companies in India denied 11% of health insurance claims and had 6% of claims pending as of March 2024, a report by the Insurance Regulatory Authority of India (IRDAI) stated. The report highlighted that health policy claims amounting to Rs 26,000 crore were disallowed and repudiated by insurance companies during the year ended March 2024, indicating a significant increase from the previous year.
Specifically, this rejection amount represented a 19.10% rise from Rs 21,861 crore rejected in the year ended March 2023, showcasing a notable trend of high claim rejections in the health insurance sector.
The annual report revealed that claims disallowed by insurance companies amounted to Rs 15,100 crore, up from Rs 12,754 crore in the previous year. Additionally, insurers repudiated claims totaling Rs 10,937 crore in FY24, compared to Rs 9,107 crore in the prior year.
A claim is rejected when an insurance company refuses to process it due to issues with its validity. This typically occurs when there are errors or discrepancies in the policyholder’s documentation, terms, or procedures. On the other hand, claim repudiation occurs when an insurer denies a claim after reviewing it and determining that it does not meet the policy’s terms and conditions.
The claim settlement ratio of an insurance company is determined by the number of claims successfully resolved compared to the total number of claims received in a specific time period. For instance, if a company receives 100 claim requests in a year and settles 90 of them, its claim settlement ratio would be 90 percent. A claim settlement ratio exceeding 85% is considered favorable, as it signifies the reliability of the insurer.
Claims processed
As per IRDAI’s report for the 2023-24 period, general and health insurers processed a total of 2.69 crore health insurance claims. The average payout per claim stood at Rs 31,086. Of the total number of claims settled, 72% were processed through third party administrators (TPAs), while the remaining 28% were settled internally.
Death claims
According to the IRDAI Annual Report, life insurance companies paid out a total of Rs 48,512 crore in death claims for the year ending in March 2024, up from Rs 46,380 crore the previous year. This amount was divided into Rs 28,868 crore for individual policies and Rs 19,644 crore for group policies.
Non-life insurers
In the same period, the non-life insurance industry in India recorded a direct premium of Rs 2.90 lakh crore, showing a growth of 12.76% compared to the previous year. The public sector general insurers saw an increase of 8.88%, with their contribution rising from Rs 82,891 crore in 2022-23 to Rs 90,252 crore in 2023-24. Private sector insurers, which include standalone health insurers, also experienced growth, underwriting Rs 1.88 lakh crore compared to Rs 1.58 lakh crore in 2022-23.
In the FY24, 24 private insurers, including standalone health insurers, experienced growth in premium underwriting compared to the prior year. The specialized insurers collectively underwrote a gross direct premium of Rs 11,211 crore. According to the report, public sector general insurers held a market share of 35.03%, while private sector general insurers held the remaining 64.97%.
Commission paid
According to IRDAI, life insurers paid a total commission of Rs 51,524 crore in the financial year 2023-24. The commission expenses ratio, which is the commission expenses as a percentage of premium, saw an increase to 6.21% from 5.41% in the previous year. Despite this increase, the total commission outgo rose by 21.74% (with total premium growth at 6.06%) in 2023-24 compared to the year before.
Insurance penetration
The report, which was released this week, noted that the insurance penetration experienced a decrease for the second consecutive year in 2023-24, falling to 3.7%. This was a decrease from 4% in the previous year and a peak of 4.2% in 2021-22 during the Covid-19 pandemic. This decline goes against the global trend.