Why Health Insurance Claims Get Rejected in India: What the Data Shows and the Clauses Behind It

Roughly one health insurance claim in twelve is turned down in India. That much is on the record. Why those claims are turned down is a question the regulator itself can’t answer with numbers, because it doesn’t collect them. So most of what you read about the “top reasons for rejection” is a list somebody wrote, not data somebody counted.

This guide does it the other way round. It starts with the figures that do exist, from the insurance regulator, Parliament and the Insurance Ombudsman’s own annual report, and then goes through the policy clauses insurers actually rely on when they say no, or when they pay less than the bill.

What the numbers show, and the gap in them

In 2024-25, insurers handled 3.26 crore health claims. According to IRDAI’s annual report, as reported by Insurance Business, 87% were settled, 8% were repudiated and about 5% were still pending at the end of the year. On those rounded figures, that is around 26 lakh claims refused in a single year.

Insurance Business also reported something more surprising: IRDAI tracks how many claims are repudiated, but not the reasons. Parliament was told that insurer-wise data on claims rejected for grounds such as “non-medical necessity” or “exclusion” was not available for the previous three years.

“Rejected” is really two different things

The most detailed official split comes from a Lok Sabha answer in February 2025, covering 2023-24. The Minister of State for Finance gave a total of ₹26,037.65 crore in claims that weren’t paid, and divided it in two.

This is worth reading carefully, because a lot of coverage got it wrong. Headlines that “₹15,100 crore of claims were rejected” in 2023-24 are quoting the disallowed figure, the money cut from claims that were otherwise paid. Outright rejections were the smaller of the two. For most families, in other words, the more common experience isn’t a letter saying no. It’s a settlement that covers less of the hospital bill than they expected.

What reaches the Ombudsman

The one place where disputes are counted by type is the Insurance Ombudsman. Its 2024-25 annual report, published by the Council for Insurance Ombudsmen, shows how dominant health has become.

The report also classifies health complaints by type. Of the 32,503 health complaints it classified, 27,575 were within the Ombudsman’s remit, and 26,507 of those, 96%, were about a claim being refused in full or in part. Delays, premium disputes and policy servicing barely register by comparison.

One smaller number in the same table is worth knowing: 1,715 health complaints were turned away because the person had not first complained to the insurer. The Ombudsman can only hear a case after the insurer has had its chance to answer in writing.

The reasons, clause by clause

With no national breakdown of reasons, the useful thing is to know which clause an insurer is relying on, and what the rules say that clause can and can’t do.

Something wasn’t disclosed

A pre-existing disease, in IRDAI’s standard definition, is a condition diagnosed, or for which you had medical advice or treatment, in the 36 months before the policy started. Under the 2024 product regulations, the waiting period for such a condition can be no more than 36 months. If a claim arrives that the insurer believes is linked to a condition you didn’t mention on the proposal form, it can refuse the claim on that ground.

The time limit on that argument is the moratorium. IRDAI’s 2024 health master circular is direct: no health policy or claim “shall be contestable on any grounds of non-disclosure and/or misrepresentation except for established fraud, after the completion of the Moratorium Period, i.e. 60 months of continuous coverage.” Years with a previous insurer count if the policy was ported. After five years, an insurer that wants to reject on non-disclosure has to prove fraud.

The waiting period hadn’t finished

Policies carry waiting periods for pre-existing conditions and for named illnesses and procedures. A claim during that window is refused under the policy’s own terms, and these are among the harder rejections to overturn, because the dates are not in dispute. The thing to check is whether the insurer has counted correctly. Waiting periods already served with a previous insurer carry across when a policy is ported, and the health master circular says they are protected when a policy is renewed within the grace period.

“Hospitalisation wasn’t necessary”

Insurers sometimes argue that a condition could have been treated as an outpatient, so the admission doesn’t qualify. There is no national data on how often this happens. It is fought on medical records: the admission notes, the treating doctor’s reasoning, and whether the procedure appears on the policy’s day-care list. A short letter from the treating doctor explaining why admission was needed is usually the strongest single piece of evidence a family can add.

Room rent: the deduction that isn’t a rejection

Many policies cap the room rent they will pay, often as a fixed amount per day. Choose a more expensive room and the insurer can apply a proportionate deduction: it pays the same fraction of certain other charges as the room limit is of the room you took. This is where a large part of the “disallowed” money goes.

IRDAI has limited the damage. Its circular of 11 June 2020 says the deduction can apply only to “associated medical expenses”, which each policy must define, and that three kinds of cost can never be part of that definition: pharmacy and consumables, implants and medical devices, and diagnostics. The deduction can’t be applied to ICU charges at all, and it can’t be applied in a hospital that doesn’t charge differently by room category.

The paperwork and the process

Under the 2024 health master circular, documents for a claim are the insurer’s and the TPA’s job to collect from the hospital: “Policyholder shall not be required to submit the documents.” No claim can be repudiated without approval from the insurer’s Product Management Committee or its Claims Review Committee, and a rejection or partial disallowance has to give “full details” with reference to the specific terms of the policy. A letter that just says “not payable”, with no clause named, doesn’t meet that standard.

A worked example: how a room upgrade becomes a ₹52,500 bill

Take a four-day admission for surgery. The policy caps room rent at ₹5,000 a day; the patient takes a room at ₹8,000 a day. The limit is 62.5% of the room actually used, so the insurer pays 62.5% of the associated medical expenses the policy defines. Here we assume the policy defines them as room rent, doctors’ fees, nursing and surgery charges.

The family pays ₹52,500, about a fifth of the bill, and no claim was “rejected”. If the insurer had wrongly applied the same 62.5% to the pharmacy, implant and diagnostics as well, it would have kept back another ₹48,750 (37.5% of ₹1,30,000). That is exactly the kind of cut the 2020 circular forbids, and it is worth checking line by line on any settlement letter.

If your claim has already been turned down

Ask for the reason in writing with the clause it relies on, if the letter doesn’t give it. Then complain to the insurer in writing; that step is what opens the door to the Ombudsman, and skipping it is why 1,715 health complaints were sent back in 2024-25. The deadlines, the complaint letter and the rest of the route are set out in our guide to appealing a rejected insurance claim.