Buying a health insurance policy feels like the finish line. You have compared plans, paid the premium, and downloaded the policy document. In your mind, you are now covered. But the truth is that owning a policy is only the beginning. The real test comes on the day you actually raise a claim — and that is exactly where a surprising number of people get caught off guard.
Recent industry data tells a sobering story. In FY 2024–25, insurers in India processed around 3.26 crore health insurance claims, and while about 87% were settled, roughly 8% were repudiated (rejected) and close to 5% were still pending at year-end (Source: IRDAI Annual Report 2024–25). In other words, more than one in ten claims did not get paid the way the policyholder expected. That is not a rounding error. That is millions of families discovering, at the worst possible moment, that the safety net they paid for had holes in it.
The good news is that most rejected or reduced claims are avoidable. They rarely happen because insurers are villains looking for excuses. They happen because of small gaps — a detail left off a form, a policy clause nobody read, or a hospital bill that did not match the fine print. At KABIA, we believe an informed policyholder is a protected policyholder. So let us walk through the real reasons claims fall apart, and what you can do to keep yours airtight.
The claim numbers you should actually understand
Before the “how,” it helps to sit with the “how much.” Across the industry in FY 2024–25, insurers settled the large majority of claims — close to nine out of ten — while a smaller share were repudiated and a few remained pending at year-end (Source: IRDAI Annual Report 2024–25). Together, insurers paid out ₹94,248 crore in health claims that year, with the average settled claim working out to about ₹28,910 (Source: IRDAI Annual Report 2024–25).
Two lessons hide inside those numbers. First, the system does work for most people most of the time — insurance is not a scam, and honest, well-documented claims usually go through. Second, the minority of claims that get denied are almost always denied for reasons the policyholder could have controlled. The difference between the two groups often comes down to what happened months or years earlier, when the policy was purchased and the form was filled in.
Reason 1: Not disclosing pre-existing conditions
This is the single biggest reason claims collapse, and it is entirely preventable.
When you buy a policy, the proposal form asks about your medical history — past illnesses, ongoing conditions, medications, surgeries. Many people breeze past these questions. They assume that common conditions like high blood pressure, thyroid issues, or diabetes are “normal” and not worth mentioning. Sometimes an eager agent, keen to close the sale quickly, does not probe deeply either.
Here is the problem. If you are later hospitalised for something connected to a condition you never disclosed, the insurer has every right to reject that claim on the grounds of non-disclosure. All the premiums you faithfully paid can count for nothing at the exact moment you need the money most.
This mistake shows up especially often when children buy remote cover for elderly parents. You pay a high premium because of their age, but if the proposal form is filled in casually — a few conditions skipped, a medication forgotten — the entire investment can unravel when a claim arises. The fix is simple but requires discipline: declare everything, even conditions you think are minor or well-managed. Full disclosure may push your premium up slightly or add a waiting period, but it converts your policy from a gamble into a genuine guarantee.
Reason 2: Hospitalisation that isn’t really needed
The second reason is more uncomfortable, because it is not always the patient’s fault.
There are cases where a doctor recommends admission for a condition that could reasonably be treated on an outpatient basis, and a hospital is happy to admit because there is a financial incentive to fill a bed. A fever from a non-specific cause, for instance, may not medically justify hospitalisation in an insurer’s eyes.
When the insurer reviews such a claim, it is within its rights to ask whether admission was actually necessary. If the paperwork does not establish a genuine medical need to be hospitalised, the claim can be reduced or rejected — even though you did nothing wrong except follow advice. The cost and nature of the treatment also feed into how much finally gets approved.
What can you do? Ask questions before you are admitted. Is hospitalisation genuinely required, or can this be managed as day care or outpatient treatment? Request that the hospital document the medical justification clearly. A little friction at admission is far better than a shock at discharge.
Reason 3: The policy conditions you skipped reading
Even a perfectly valid, fully disclosed claim can come back smaller than the hospital bill. The culprit here is usually the fine print — the limits and conditions baked into your policy that quietly cap what the insurer will pay. Four of these deserve your attention.
Room rent limits. Many policies cap the daily room charge they will cover, or tie it to a percentage of your sum insured. If you choose a room that costs more than your limit allows, the excess is not the only thing you pay. Because of a clause called proportionate deduction, the insurer may scale down associated costs too — surgeon’s fees, nursing, diagnostics — in the same proportion. Pick a ₹10,000 room when your policy allows ₹5,000, and you may find the insurer settling only half of many linked charges. A large-looking bill can shrink dramatically at the settlement stage.
Co-payment. This is a fixed share of every claim that you agree to pay yourself. A 10% co-pay means you cover ₹10,000 on a ₹1 lakh claim. Co-pay usually lowers your premium, which is why people accept it — but they forget it applies at claim time, every time.
Deductible. This is the amount you must bear before the insurer’s cover kicks in at all. A small claim below your deductible may effectively return nothing.
Sub-limits. Certain treatments and surgeries carry their own caps, independent of your overall sum insured. A ₹10 lakh policy does not mean ₹10 lakh for every procedure.
None of these clauses are hidden traps invented to cheat you — they are all printed in your policy. The trap is simply not reading them. Spend one focused hour with your policy document before you ever need it, note your room-rent limit, co-pay, deductible, and any sub-limits, and you will never be blindsided.
The quiet threat: medical inflation
There is one more reason to treat your cover seriously, and it has nothing to do with claim denials. It is medical inflation. While general consumer prices in India have been rising at around 4% a year, medical costs have been climbing far faster — roughly 12–13% annually, more than triple the general inflation rate (Source: Milliman, Measuring Medical Inflation in India). At that pace, the same procedure that costs you a certain amount today could cost several times as much within twenty years. A sum insured that looks generous now can feel thin a decade later. This is why reviewing your cover periodically, and topping it up as your life stage and family needs change, matters as much as buying it in the first place.
Don’t dismiss the help you may need
Insurance language is dense on purpose, and it is easy to make an expensive mistake without realising it. If any part of the process feels unclear — the proposal form, the conditions, the exclusions, or a claim already in dispute — it is worth bringing in a qualified insurance advisor. The rigour of getting the policy and the claim right can make the biggest difference to the final outcome.
And if a claim is delayed or disputed, do not simply accept the first answer. Read the fine print, understand the specific reason cited, and provide the supporting documents the insurer needs. Many disputed claims are eventually resolved once the paperwork tells the full story.
The bottom line
A health insurance policy is only as strong as the care you put into it. Disclose your medical history honestly and completely. Question whether hospitalisation is truly necessary before you are admitted. Read your policy’s limits and conditions before you file a claim, not after. And revisit your cover as costs rise and your needs change.
Do these four things, and you move from the one-in-four whose claims run into trouble to the vast majority whose policies do exactly what they were bought to do — protect you when it matters most.
Have questions about your policy or a claim? The team at KABIA is here to help you read the fine print before life makes you.
Sources
1. IRDAI (Insurance Regulatory and Development Authority of India), Annual Report FY 2024–25 — health insurance claims processed, settlement/repudiation/pending percentages, total amount paid (₹94,248 crore), and average claim amount (₹28,910).
2. Milliman, Measuring Medical Inflation in India — India medical inflation rate (~12–13%) versus general/CPI inflation (~4%).