IRDAI has pulled up eight major health insurers after finding serious lapses in how they handle claims. Recent regulatory inspections revealed problems like delays in claim settlements, wrongful claim rejections, unwarranted deductions, and poor grievance handling practices. These issues have triggered the Insurance Regulatory and Development Authority of India (IRDAI) to initiate show-cause notices against the insurers.

What Triggered IRDAI’s Crackdown?

Over the past year, the regulator introduced a new Health Insurance Master Circular (in May 2024) that set strict norms for how insurers must settle claims and treat customers. When IRDAI conducted inspections to check compliance with these norms, it flagged multiple violations. Some of the most common concerns were:

    • Excessive Delays in Claims: Many claims were not settled within the prescribed timelines, leaving policyholders waiting longer than they should. In some cases, cashless claim approvals and reimbursements dragged well beyond acceptable turnaround times (TATs).
    • Wrongful or Improper Rejections: Inspections found instances of claims being rejected without proper justification or on flimsy grounds. 

This combination of delays and unfair rejections led to a spike in customer grievances. IRDAI was especially concerned about how insurers handled these complaints

Which Insurers Are Under the Scanner?

The show-cause notices (which are in the process of being issued) target eight insurers that span both private and public sectors. They are:

    • Niva Bupa Health Insurance (formerly Max Bupa)
    • Star Health & Allied Insurance
    • Care Health Insurance (formerly Religare)
    • Manipal Cigna Health Insurance
    • New India Assurance (public sector general insurer)
    • Tata AIG General Insurance
    • ICICI Lombard General Insurance
    • HDFC ERGO General Insurance

These are some of the biggest names in health insurance. The insurers were reportedly selected after IRDAI’s compliance review found significant issues in their health insurance portfolios

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Ditto’s Take: What It Means for You

To understand the real-world implications of this news, we reached out to our in-house experts. As one senior advisor at Ditto Insurance put it:

“For the average Joe, IRDAI’s move is actually a reassuring sign. It means the regulator is holding insurers accountable to treat customers fairly and pay claims on time. We occasionally hear of people struggling with claims. So, seeing the IRDAI crack down on delays and unjust rejections should give you more confidence that your valid claims will be honored. 

In the short run, if you’ve had a bad experience with a claim, this development increases the chances of getting it resolved. Insurers will be more cautious and customer-friendly now. And in the long run, we expect faster approvals, clearer communication, and fewer disputes.

That said, this is also a wake-up call for policyholders to stay informed. Make sure you understand your policy terms (like waiting periods, exclusions) so that you can avoid surprises when filing a claim. Always read the communication from your insurer carefully. Thanks to IRDAI, they should be explaining things in plain language. And remember, you have avenues like the Ombudsman or IRDAI’s grievance portal if you ever feel a claim was unfairly denied. 

The primary takeaway is that you’re not alone. The regulator and advisors like us at Ditto are always there to ensure you get the protection you paid for.”

What Lapses Did IRDAI Identify?

During the inspection, per the report, IRDAI identified some procedural concerns. These included an excessively detailed Customer Information Sheet, which has since been simplified; the absence of Product Management Committee members on the Claims Review Committee, which has now been rectified; and delays in submitting portability data, which have been resolved through updated systems and protocols. Here’s exactly what the concerns are:

    • Overcomplicated Customer Information Sheets (CIS): The Customer Information Sheet is a summary given to you when you buy a policy, outlining key terms and conditions. IRDAI found that some insurers had CIS documents that were excessively detailed and complicated, defeating their purpose. Instead of a simple at-a-glance summary, these sheets were too long or jargon-heavy, meaning customers likely couldn’t decipher important conditions. One insurer acknowledged this and has since simplified its CIS to be more user-friendly. This is crucial because a clear CIS helps you understand your coverage and avoids nasty surprises during claims.
    • Unwarranted Deductions: Even when claims were approved, some insurers were deducting amounts that were not admissible under the policy. These inadmissible cost deductions were made in violation of norms. For example, removing certain hospital charges or limiting room rent beyond policy terms. Essentially, policyholders weren’t getting the full benefits they were entitled to.
    • Non-Transparent Communication: IRDAI noted that when claims were denied or partially paid, the communication to customers was not clear or detailed enough. Some rejection letters lacked specific reasons or references to policy clauses, leaving customers in the dark. (In fact, new IRDAI norms now mandate that any claim repudiation or deduction must come with a detailed explanation citing the exact policy terms. Poor communication erodes trust and makes it harder for policyholders to appeal or understand the decision.
    • Over-Reliance on TPAs: Many insurers outsource claims handling to Third-Party Administrators. While TPAs can improve efficiency, excessive reliance on TPAs was cited as a concern. In some cases, TPAs were effectively deciding claim outcomes or causing coordination gaps. IRDAI’s regulations state that a TPA cannot reject a claim on its own, and the final say lies with the insurer’s medical team. If insurers let TPAs run the show without oversight, it can lead to inconsistent claim decisions and slower turnaround times.
    • Long Turnaround Times: Perhaps the most glaring lapse was the delay. Cashless claims were not being authorised quickly, and reimbursement claims were taking too long to settle. This contravenes the Master Circular’s guidelines (for instance, cashless requests should be decided within 1 hour, and final discharge approvals given within 3 hours of hospital intimation. Delays beyond these limits were flagged, with IRDAI even noting that if an insurer exceeds the 3-hour discharge approval window, they must bear any extra hospital charges from their own funds.

But at the end of the day, health insurance is still worth it.

A serious health event can wipe out years of savings. Even with claim-related challenges, having a cover is essential unless you can comfortably self-insure. Paying a modest premium could save you from a catastrophic financial hit.

If you’re unsure which plan suits you or how to navigate exclusions and clauses, Ditto Insurance advisors are here to help. Our Certified Advisors offer a free consultation to guide you through policy fine print and claims. No spam, no pressure. Just honest insurance advice. And if a genuine claim is rejected, we’ll fight for you, so you don’t have to face the insurer alone.

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