You have paid your health insurance premium without fail, year after year. Then a medical emergency arrives — a hospitalisation, a surgery, an unexpected diagnosis. You file the claim expecting the safety net to hold. Instead, a rejection letter arrives. It is a moment that does not just hurt financially. For millions of Indians, it feels like a betrayal.
And the numbers confirm this is not an isolated experience. According to IRDAI’s annual report, health insurance claims worth Rs 30,000 crore were rejected or repudiated in FY 2024-25 — a 15% jump from the previous year. That is not a rounding error. That is real money, denied to real people, at the worst possible moment in their lives.
It is against this backdrop that IRDAI is now preparing a strict code of conduct governing contracts between hospitals and insurance companies — a recognition at the highest regulatory level that the system has been failing policyholders, and that the problem is structural, not incidental.
The scale of the problem
An alarming 11% of all health insurance claims were rejected in 2023-24, amounting to Rs 15,100 crore in disallowed payouts. The figure has only grown since. Between inflated hospital bills, opaque insurer exclusions and a claims process that places nearly all the burden of proof on a patient who is often sick and disoriented, the system has evolved into one where the house almost always wins.
The complaint patterns are consistent and damning. Insurers cite pre-existing conditions that were never disclosed — even when the policyholder was genuinely unaware. They flag documentation errors on discharge summaries that the hospital, not the patient, is responsible for filling. They declare hospitalisations medically unnecessary after the fact. And they invoke room rent caps, consumable exclusions and sub-limits buried in fine print that most policyholders have never read.
The hospital side of the problem
The crisis is not only about insurer behaviour. Hospitals — particularly those in insurer networks — have developed their own set of practices that have contributed to the mess.
Insurers maintain two types of hospital lists — an empanelled network list for cashless agreements and a blacklist of hospitals flagged for fraudulent claims, inflated billing or quality concerns. A hospital in Haryana was blacklisted after insurers discovered inflated billing for routine procedures, with even legitimate patients at that facility facing claim rejections as a result.
The dynamic creates a perverse triangle. Hospitals inflate bills to maximise recovery from insurers. Insurers respond by tightening approval criteria and rejecting borderline claims more aggressively. Policyholders, caught in the middle, bear the cost of both sides gaming the system.
Claims where a diagnosis shows fever but billing shows surgery-related charges are immediately rejected and may lead to policy cancellation — but the reality is that many inflated bills are more subtle than this, and the mismatch between what hospitals charge and what insurers will pay has become one of the most common sources of out-of-pocket expenditure for insured patients.
What IRDAI has already done — and what is coming
The regulator has not been entirely passive. In March 2026, IRDAI issued rules requiring insurers to settle 100% of genuine claims within 15 calendar days of receiving the final discharge summary, with automatic approval and compound interest penalties applying if the deadline is missed. IRDAI’s vice-chairperson stated that hospitals misusing cashless rules would be stripped of their network status within 15 days.
The Cashless Everywhere initiative now allows policyholders to receive cashless treatment at any hospital in India regardless of network status, and insurers must approve final cashless authorisations within three hours of receiving bills at discharge.
But the forthcoming code of conduct goes further — targeting the bilateral contracts between hospitals and insurers that have been the root of the problem. Unregulated contractual arrangements between the two have created an ecosystem of inflated package rates, selective approvals and information asymmetry that has systematically disadvantaged policyholders. Standardising and regulating these contracts is the intervention that consumer advocates have been demanding for years.
What policyholders can do right now
Until the regulatory framework tightens fully, the burden of protecting yourself from rejection remains largely on you. Verify your hospital is on your insurer’s network list before any planned admission. Intimate your insurer within the required timeframe — before admission for planned procedures and within 24 hours for emergencies. At discharge, do not leave without a complete set of original documents — all bills, the discharge summary signed by the treating doctor, all investigation reports and prescriptions. If your claim is rejected, escalate immediately to IRDAI’s Integrated Grievance Management System portal. The ombudsman relief rate runs at approximately 40% in favour of policyholders — meaning four in ten disputed rejections are overturned on appeal, which is both a reason for hope and a damning indictment of how many legitimate claims are being wrongly denied in the first instance.
The Rs 30,000 crore rejected in a single year is not just a statistic. It is the measure of how far India’s health insurance system has drifted from its fundamental promise.