Health insurance is often sold as a safety net—one that protects families from the financial shock of illness and hospitalisation. Yet, for many policyholders in India, this safety net develops holes at the moment it is needed the most. Recent data from FY24 highlights a troubling reality: 11% of health insurance claims were rejected, amounting to nearly ₹26,000 crore in denied claims.
Behind these numbers lie real stories—of families scrambling to arrange funds, of treatment decisions influenced by financial stress, and of trust in the insurance system being shaken. While insurers maintain that claim decisions are based on policy terms, the data reveals that a significant portion of rejections stem from avoidable gaps in awareness, documentation, and communication.
This raises a critical question: Are policyholders adequately equipped to protect themselves from claim rejection?
What the FY24 Data Tells Us
The regulator’s FY24 analysis offers important insights into why health insurance claims are rejected. Contrary to popular belief, most rejections are not linked to fraud. Instead, they arise from procedural issues, policy conditions, and misunderstandings.
Top Reasons for Claim Rejection in FY24
1. Waiting Period Not Completed (25%)
One in four claims was rejected because the policyholder had not completed the required waiting period. These waiting periods apply to:
- Initial waiting period (usually 30 days)
- Pre-existing disease waiting period (typically 2–3 years)
- Disease-specific waiting periods (for conditions like hernia, cataract, joint replacements, etc.)
Many policyholders assume that once a policy is issued, coverage is immediate. In reality, most health policies are designed to cover unforeseen illnesses—not conditions that existed or were anticipated at the time of purchase.
2. Excluded Services – OPD and Daycare Confusion (25%)
Another 25% of claims were rejected because the treatment or expense was not covered under the policy. OPD consultations, diagnostic tests, and certain daycare procedures are often misunderstood as being automatically included.
While modern health policies have expanded daycare coverage, exclusions still exist. Lack of clarity at the time of purchase often leads to unpleasant surprises during claims.
3. Unanswered Insurer Queries (18%)
In nearly one-fifth of rejected claims, insurers cited non-response or incomplete responses to their queries. These queries may relate to:
- Past medical history
- Treatment justification
- Medical records or investigation reports
Delays or partial submissions can result in claims being closed or rejected—even when the claim itself may otherwise be valid.
4. Unjustified Hospitalisation (16%)
Claims were also denied where insurers concluded that hospitalisation was medically unnecessary or that treatment could have been managed on an OPD basis.
This is especially common in short-duration admissions, single-day hospitalisations, or cases where detailed medical justification is not adequately documented.
5. Documentation Errors (4.9%)
Though relatively smaller in proportion, errors such as missing discharge summaries, incorrect bills, or mismatched dates still lead to claim denials.
The Hidden Cost of Claim Rejections
A rejected claim does more than deny reimbursement—it disrupts lives. Medical emergencies already come with emotional distress. When a claim is rejected, families may be forced to:
- Borrow at high interest rates
- Liquidate savings or investments
- Delay or discontinue treatment
For senior citizens, chronic patients, and families with limited financial buffers, claim rejection can be devastating.
Importantly, many policyholders only realise gaps in their coverage after hospitalisation, when corrective action is no longer possible.
Full Disclosure of Pre-Existing Conditions: A Critical Safeguard
One of the most common—and most misunderstood—areas in health insurance is pre-existing condition disclosure.
At the time of policy purchase or renewal, policyholders must declare all known medical conditions, past treatments, surgeries, hospitalisations, and ongoing medications, no matter how minor they may appear. This includes conditions that may not currently require treatment.
The 36-Month Rule Explained
As per regulatory norms, insurers are allowed to verify disclosures and investigate non-disclosure for up to 36 months from the date of policy issuance. If a material non-disclosure is discovered during this period, the insurer has the right to reject the claim.
However, it is important to note that even after 36 months, a claim can still be denied if fraudulent intent or wilful suppression of material facts is proven.
Proposal forms are legal documents. Any misrepresentation—intentional or otherwise—can have long-term consequences.
Remember: Transparency at entry is the strongest protection at exit.
Waiting Periods: The Most Common Blind Spot
Waiting periods remain the single largest contributor to claim rejection. Policyholders often focus on sum insured and premium amounts, while overlooking waiting period clauses buried in policy wordings.
Every policyholder should clearly understand:
- Which diseases are subject to waiting periods
- When the waiting period begins and ends
- Whether portability or continuity benefits apply
Without this clarity, filing a claim prematurely almost guarantees rejection.
Pre-Authorisation: Your First Line of Defence
For planned hospitalisations try to go to the network hospital, pre-authorisation is one of the most effective tools to avoid claim disputes. It allows insurers to assess:
- Medical necessity
- Room eligibility
- Treatment coverage
A pre-authorisation approval provides early clarity and reduces post-discharge surprises. Even in emergencies, insurers or TPAs must be informed at the earliest to initiate the cashless process.
If going to Non-network hospital, inform your insurer. Ensure that the hospital is not blacklisted to avoid rejection.
Documentation and Communication: Small Gaps, Big Impact
Many claims fail not because they are invalid, but because they are poorly documented or inadequately followed up.
Policyholders should maintain:
- Discharge summaries
- Prescriptions
- Diagnostic reports
- Doctor’s notes
- Itemised bills
Equally important is responding promptly to insurer queries. Silence or delay is often interpreted as non-cooperation, which weakens the claim.
Timelines Matter: The 30-Day Rule
Most health insurance policies require claim documents to be submitted within 30 days of discharge. Missing this deadline—especially in reimbursement claims—can result in outright rejection.
A simple checklist and basic record-keeping can prevent such avoidable losses.
Fraudulent Claims: A Necessary Caveat
While most rejections arise from procedural lapses, it is important to acknowledge that fraudulent claims damage the entire insurance ecosystem. Insurers are empowered to deny claims where fraud, fabrication of documents, or deliberate misrepresentation is established.
Policyholders must understand that insurance operates on trust—and misuse leads to stricter scrutiny for everyone.
The Way Forward
The FY24 data highlights the urgent need for:
- Better policyholder education
- Simpler policy wordings
- Clearer communication during claims
- Stronger grievance redressal mechanisms
While regulatory oversight has improved, awareness remains the most powerful tool for consumers.
Health insurance cannot be treated as a passive purchase. Reading the policy, asking questions, and maintaining records may seem burdensome—but these steps can make the difference between approval and rejection.
As healthcare costs continue to rise, safeguarding one’s health insurance claim is no longer optional. It is essential.
Authored by:
Shilpa Arora- Co-founder and COO of Insurance Samadhan
