Based on the IRDA annual report, we discuss the claim rejection data for standalone health insurers for FY 2021-22.
We can only answer how many claims health insurers reject yearly for standalone health insurers. IRDA does not provide break up details for the total claims processed by general insurers. For general insurers (including PSUs), we do not know how many were health insurance claims. Before we look at the data, we must make an important distinction.
Claim repudiation is the refusal to honour a claim because the insurer (in their opinion) has no liability over the circumstances mentioned in the claim. The only way forward is to apply to the grievance cell of the insurer for reevaluation or to the ombudsman or the consumer court.
Claim rejection is the refusal to honour a claim because the insurer has found the application inaccurate or incomplete. Typically a resubmission is allowed. However, when we colloquially refer to “claim rejection”, we only refer to repudiation.
| Name | Claims repudiated by Total claims outstanding in FY 2020-21 | Claims repudiated by Total claims outstanding in FY 2021-22 |
| Aditya Birla Health Insurance | 10.10% | 6.2% |
| Care Health | 6.90% | 11.1% |
| ManipalCigna Health Insurance | 9.60% | 10.0% |
| Niva Bupa Insurance (previously Max Bupa) | 9.10% | 9.0% |
| Reliance Health Insurance | 41.50% | 20.8% |
| Star Health and Allied Insurance | 15.00% | 16.5% |
Please note that the Total claims outstanding are the sum of the claims not resolved at the start of the financial year (FY) and the claims received that FY. This is not (1- claim settlement ratio) because claim acceptance does not mean 100% payout! Even if the insurer pays 1% of the claimed amount and repudiates 99%, it will be counted as a processed claim!
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The data for Reliance health can be ignored as they are a new player. They only received 68 new claims in FY 2021-22.
Considering the percentage of total claims intimated/booked during the period, we see that Star Health has the largest market share amongst standalone health insurers (a higher no of claims implies more policies sold).
| Insurer | Percentage of total claims intimated/booked during 2021-2022 |
| Aditya Birla Health Insurance | 11.98% |
| Care Health | 17.15% |
| ManipalCigna Health Insurance | 10.02% |
| Niva Bupa Insurance | 8.69% |
| Reliance Health Insurance | 0.00% |
| Star Health and Allied Insurance | 52.15% |
Based on this data, someone wanting a new personal health insurance policy is unlikely to consider Star Health. However, this does not mean a company like Niva Bupa is a better choice.
Niva Bupa’s market share is relatively small compared to Star Health. Already they have repudiated 9% of all outstanding claims. This number is only going to increase as they sell more policies. Aditya Birla has certainly done better though they have faced more claims than Niva Bupa; these companies are still in the early days.
Buyers must appreciate that the more a private insurer grows, the more claims it will face, and the more it will be forced to repudiate to stay afloat. And they will also increase premiums.
Star Health is paying the price for rapid growth. Before the pandemic, you may have seen that the product was aggressively sold. The danger of doing this is creating an unhealthy pool of buyers who will repeatedly claim.
The incurred claim ratio (ICR) is defined as net incurred claims divided by net earned premium (net of all operating expenses, commissions etc.). This should neither be too low nor too high but how low is low and high is high are quite arbitrary.
If the ICR is low, net incurred claims << net earned premium for a particular financial year. This means the profit margin for the insurer is high. So an investor (in the insurance company) would prefer this.
If the ICR is high, the net incurred claims will reduce the profit margin. So an investor (in the company, not a policy buyer) will not want this!
The ICR is a crude measure of the insurance company’s financial strength. It has nothing to do with the probability of an insurance company payout. A young private insurer will see violent fluctuations in its ICR from one FY to another (eg. Reliance Health). This is because the number of claims received and the amount paid will vary quite a bit.
Incurred Claim Ratio of Standalone Health Insurers
| Name | 2019-20 | 2020-21 | 2021-22 |
| Aditya Birla Health Insurance | 49.08 | 49.99 | 69.56 |
| Care Health | 59.13 | 55.15 | 65.07 |
| ManipalCigna Health Insurance | 61.64 | 61.13 | 76.17 |
| Max Bupa Insurance | 53.51 | 56.09 | 62.12 |
| Reliance Health Insurance | 62.17 | 45.68 | 196.55 |
| Star Health and Allied Insurance | 65.91 | 94.44 | 87.06 |
Look at the jump in Start Health’s ICR or profitability drop. In 2020-21 they lost 94% of premiums to claims. This has decreased to 87%, but a high ICR is not sustainable for a private insurer.
I am convinced that other private players will also struggle once their market share increases to the level of Star Health.
Today many Star Health customers want to “port”. But to where? How long before the new insurer also suffers the same plight? So it is a case where you can run but cannot hide. Also, many assume it is easy to port. Any responsible private player will not touch a porting request (or often a new application) with pre-existing diseases.
Buyers must appreciate that private players lay out the red carpet at the time of purchase with all sorts of accoutrements – no room sub-limits, lower waiting period, restore this and restore that and so on. But the reality is that very few are truly experienced regarding the volume of claims in India. Star Health is the oldest standalone insurer, and it has taken them about 16 years to grow to a sizeable extent and face the heat.
Does that mean one should avoid private players and buy PSU policies? That is certainly one way to go, and true in my case – Why we purchased United India Super Top Up Policy with 95 lakhs sum insured (although we have a set of private insurance policies as well – Why we purchased a 2nd set of base and super top-up health insurance policies.
However, this does not mean things are easy with PSUs! The grass always looks greener on the other side.
So what, then? Buy from any insurer you are comfortable with but do not trust or rely on them (or your agent). Control what you can control – like personal fitness healthy diet, and build a corpus for medical expenses just in case. Build a relationship with a family doctor and other specialists (as applicable).
Some argue that this scenario is the reason not to buy health insurance. Unfortunately, that is too big a risk on our net worth. From 2006 we have processed five claims with United India, and if we did not have insurance, it would have been a sizeable dent in our wealth. Hospitalizations and emergencies do not wait around until we get rich.
As long as we appreciate the terms and conditions of the policy and are honest at the time of application, we have a reasonable chance of getting our claims processed (with a fight if necessary). I will take those odds any day. We cannot take things for granted and be prepared to pay higher premiums if the insurer faces losses!
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