Games Insurance Companies Play

It is a nightmare for anyone whose family member is seriously ill and has to be hospitalised. Besides the mental trauma and agony, the financial impact for most people in our country is enormous. In many ways, falling sick has become a luxury.

If you have health insurance with decent cover, the worry lines on your forehead may be fewer. But if the hospital does not offer a cashless facility, another nightmare begins. Claims are rarely settled easily.

And this “harassment by insurance companies” is not endemic to India alone. It is a global phenomenon. The industry’s well-known 3D strategy is: Delay, Deny and Defend.

Whenever you file a health insurance claim, chances are — in a majority of cases — it will either be rejected, or the policyholder will be pressured to accept a lower settlement. Often more documents are demanded, or the dreaded “conditions apply” clause is invoked, blaming pre-existing conditions.

Common Strategies Used To Reject or Minimise Claims

• Seeking additional documents to tire out the claimant

• Asking for recorded statements immediately after an incident to catch inconsistencies that can later be used to deny coverage

• Invoking the “asterisk/conditions apply” clause, arguing that the injury or incident is excluded under policy wording

• Blaming pre-existing conditions by claiming the illness or injury existed earlier and was not caused by the current incident

For a policyholder whose family member has just come out of the ICU, this becomes an even bigger battle — getting claims accepted and reimbursed despite having faithfully paid premiums year after year.

Recently, Supreme Court lawyer Shubhendu (@BBTheorist) posted on X: “A popular yet notorious #HealthInsurance company tried to deny my wife’s insurance claim saying she had not submitted all her documents in original. They closed the claim within two months without informing us. The amount wasn’t significant (around Rs 1.10 lakh), but I decided to take the legal route to teach them a lesson.”

Being a lawyer, he read them the riot act — and it worked. “To my surprise, the amount was credited within 5 days,” he wrote on X. This clearly suggests the claim was legitimate, but the insurer was attempting to avoid payment. The moment a Supreme Court lawyer stepped in, the company quietly settled the matter — revealing how weak its case actually was.

Responding to Shubhendu’s post, well-known Delhi-based political journalist Sheela Bhatt shared her own experience. “Niva Bupa is quite notorious for asking irrelevant questions when claims are raised. Many insurance agents have told me it is reluctant to grant claims for senior citizens. I went to the Ombudsman against Niva Bupa. After one long year of to-and-from emails, they have asked for new details in my case. What harassment!”

A neighbour of mine, whose husband underwent throat cancer surgery at Mumbai’s Jaslok Hospital, told me that nearly a year later the National Insurance Company has still not settled her claim. She continues to run from pillar to post while simultaneously taking care of her husband’s medical needs.

These incidents epitomise the ordeal most people in our country face whenever they apply for health insurance claims.

Recall the Hollywood film The Rainmaker, where an insurance company called “Great Benefit” refuses to pay for a life-saving bone marrow transplant for a young man dying of leukemia — even though the treatment is covered under the policy. The film exposes the greed and unethical practices prevalent in parts of the insurance industry.

In many ways, the movie captures a reality that exists across the world.

A possible solution to this problem was suggested by renowned cardiologist Dr Devi Shetty, Chairman of Bengaluru-based Narayana Health.

Speaking at the 25th Global Conference of Actuaries in Mumbai, Dr Shetty said: “The problem between insurance companies and hospitals is universal. India is not an exception. Hospitals want to get more money and insurance companies want to pay less.”

His prescription to bridge the trust deficit among hospitals, insurers and patients is simple: hospitals should become insurers. “When a hospital becomes an insurance company, the rules of the game change. Because as an insurance company, I don’t wish to make more money as I want my patients to be in a position to afford my care.”

The idea sounds promising. But the moot question is: how many hospitals would really be willing to enter another line of business?

Meanwhile, the Maharashtra government has taken a step in the interest of patient welfare. It has asked hospitals to keep their charges reasonable and directed insurance companies to ensure that claim rejections remain low. Insurers have also been instructed to regularly submit data on approved and rejected claims.

This is the first initiative of its kind by any state government. Such monitoring could keep both hospitals and insurers under a tighter leash. Other states would do well to emulate Maharashtra.

Several questions arise. Why is it so difficult to get health insurance claims accepted and reimbursed? Why are policyholders often viewed with suspicion? Why do insurance companies resort to such mental harassment? Ironically, when a patient is admitted to a hospital, the first question often asked is: “Are you insured?”

The second: “Cashless or cash payment?”

India’s insurance industry comprises 57 companies — 24 life insurers and 34 non-life insurers. The Life Insurance Corporation of India (LIC) remains the sole public-sector life insurer, while six public-sector companies operate in the non-life segment. GIC Re is the country’s only national reinsurer.

Despite privatisation, insurance penetration in India — both life and non-life — remains significantly lower at 3.7%, compared to the global average of 7%. Even though awareness increased after Covid-19, life insurance penetration has declined to 2.8%, while general insurance penetration has remained steady at about 1%.

The Modi government has attempted to deepen the market through several initiatives. Schemes such as Pradhan Mantri Jeevan Jyoti Bima Yojana offer life insurance of Rs 2 lakh for an annual premium of Rs 436, while Pradhan Mantri Suraksha Bima Yojana provides accident cover for just Rs 20 a year.

But the biggest impact has come from Ayushman Bharat, which provides cashless health insurance coverage of Rs 5 lakh annually. Nearly 12 crore poor families have benefited from the scheme.

The government has also removed 18% GST on health insurance premiums, provided Rs 5 lakh free cover for senior citizens above 70 years, and urged non-empanelled hospitals to offer cashless facilities. In the long run, the aim is to move towards a completely cashless healthcare system.

All these measures should have a positive impact. As the market broadens and deepens, the insurance regulator IRDAI’s vision of “Insurance for All by 2047” appears increasingly achievable.