Whalesbook
Mumbai: India's non-life and health insurers have successfully navigated a record surge in claims during the fiscal year 2024-25, pushing settlement ratios to new highs while simultaneously cutting down on rejected claims. This significant operational achievement comes amid a notable decline in the average payout per claim, a trend influenced by expanding policy coverage and the increasing adoption of cashless treatment facilities.
Record Claim Settlement Volumes
Insurers processed and settled approximately 87% of all health insurance claims filed during FY25, a marked improvement from the 83% recorded in the previous fiscal year. This translated into 32.6 million claims being finalized, underscoring the sector's enhanced capacity and efficiency. The share of repudiated claims saw a substantial drop, falling to around 8% from approximately 11% year-on-year. Pending claims also eased, settling at roughly 5% by the end of March compared to 6% previously.
Irdai's Drive for Efficiency
The Insurance Regulatory and Development Authority of India (Irdai) has been a key catalyst in this transformation, persistently urging the industry towards faster, more transparent claim settlement processes. This regulatory push has spurred intensified efforts from the General Insurance Council. Initiatives include expanding cashless coverage networks and negotiating standardized, reasonable treatment rates with healthcare providers.
Irdai mandated insurers to target 100% cashless claim processing, implementing stringent timelines. Pre-authorisation requests must now be processed within one hour, and discharge approvals within three hours. Insurers delaying these approvals face financial penalties, with losses to be borne from shareholder funds. Furthermore, governance around claim rejections has been tightened, requiring sign-off from a product management committee or a claims review committee for all repudiations.
Declining Average Payouts Amid Higher Penetration
Despite the overall increase in total payouts, which rose to ₹94,248 crore in FY25 from ₹83,493 crore in FY24, the average amount paid per claim decreased to ₹28,910 from ₹31,086. This divergence is attributed to a greater proportion of lower-ticket claims entering the system. The expansion of both retail and group health insurance penetration means more individuals, potentially with less complex health needs or lower policy limits, are utilizing their coverage.
Shift in Claim Processing
Cashless settlements continue to dominate the claims landscape, accounting for approximately 66.35% of the total claim amount paid in FY25, a figure largely consistent with the previous year. Reimbursement claims represented about 29.34% of payouts, a slight decrease from 31.35% a year prior. Third-party administrators (TPAs), while still handling a significant portion, saw their share in claim settlements decrease modestly to about 69% by number, down from 72%. Conversely, in-house claim settlement capabilities within insurance companies grew, rising to 31% from 28%, reflecting ongoing investments by insurers in their internal claims management infrastructure.