India’s Health Insurance Sector Records Rs 94,248 Crore in Claims as Digital Settlements Reshape Patient Experience

New Delhi [India], January 15: The year 2025 concluded with significant developments in India’s health insurance landscape, as the sector recorded claim payouts of Rs 94,248 crore across 3.26 crore claims, marking an 11 percent year-on-year increase. The transformation reflects not just numerical growth but a fundamental shift in how Indian families access and experience healthcare financing, according to the latest annual report by the Insurance Regulatory and Development Authority of India.

The data covering 58 crore lives under 2.65 crore policies reveals a maturing ecosystem where efficiency, accessibility, and digital integration have become defining characteristics rather than aspirational goals.

Cashless Settlements Emerge as Preferred Mode

One of the most significant developments has been the overwhelming preference for cashless claim settlements, which now account for 58 percent of all claims by number and 66.35 percent by value. This represents a decisive shift from traditional reimbursement models that often placed considerable financial strain on families during medical emergencies.

The reimbursement mode now accounts for just 41 percent of claims, while a mere 1 percent utilise a combination of both methods. This transformation has been enabled by improved hospital-insurer networks, streamlined digital workflows, and enhanced awareness among policyholders about available settlement options. For individuals navigating policy options, platforms that help compare health insurance plans have become increasingly relevant in understanding coverage features and settlement mechanisms across insurers.

The average payout per claim stood at Rs 28,910, reflecting the actual healthcare costs being absorbed by the insurance system. Notably, 69 percent of claims were processed through third-party administrators, while 31 percent were handled in-house by insurance companies, indicating the continuing relevance of TPAs in the healthcare financing infrastructure.

Operational Efficiency Shows Notable Improvement

The sector demonstrated encouraging progress in operational metrics during FY25. The incurred claims ratio improved to 86.98 percent from 88.15 percent in the previous year, suggesting enhanced underwriting discipline and risk assessment capabilities across insurers. The total net incurred claims under health insurance rose to Rs 84,850 crore, up 11 percent from the previous year.

Settlement efficiency reached approximately 87 percent, with insurers successfully processing the vast majority of claims registered during the year. Only 8 percent of claims were repudiated, while 5 percent remained pending as of March 31, 2025. These figures indicate growing transparency in policy terms and improved communication between insurers and policyholders.

Understanding performance metrics has become crucial for informed decision-making, and evaluating the claim settlement ratio of different insurers provides valuable insights into their claim processing track record and reliability during critical health situations.

Coverage Distribution Reflects Diverse Market Segments

The composition of health insurance coverage in India reveals distinct patterns across government-sponsored schemes, group policies, and individual coverage. Government-sponsored schemes accounted for 42.3 percent of lives covered, representing the largest segment and underscoring the critical role of public health insurance programs in extending financial protection to economically vulnerable populations.

Group policies, typically provided through employers or associations, covered 47.4 percent of lives and contributed the highest share of premiums at 52.3 percent. This segment represents the employed middle class and reflects the growing integration of health benefits in workplace compensation structures across corporate India.

Individual policies, while accounting for only 10.3 percent of lives covered, contributed 39.7 percent of total premiums, indicating higher premium amounts per policy in this segment. Government-sponsored policies, despite their extensive reach, accounted for just 8 percent of premium collection, highlighting their focus on affordable coverage for vulnerable sections.

Life Insurers Report Strong Health Coverage Performance

Beyond general and standalone health insurers, life insurance companies also demonstrated robust performance in health coverage segments. Life insurers settled 28,770 health insurance claims worth Rs 311 crore, representing 80 percent of claims registered during the year.

Rider claims showed even more impressive settlement rates, with 98 percent of claims being paid, totalling Rs 137 crore across 27,775 claims. This high settlement rate for riders indicates that supplementary health coverage is being honoured efficiently, providing additional financial protection beyond base health policies and reinforcing policyholder confidence in bundled insurance products.

Technology Integration Transforms Claim Experience

The shift toward digital claim processing has fundamentally altered the policyholder experience. The data indicates that insurers are processing claims more efficiently than ever before, with the vast majority of registered claims being settled within the same financial year. This represents substantial improvement over previous years when claim processing often extended across multiple quarters.

Digital platforms now enable policyholders to initiate claims through mobile applications, upload supporting documents electronically, and track claim status in real time. The seamless integration between hospitals, TPAs, and insurance companies has reduced administrative burdens on patients and families, allowing them to focus on treatment rather than financial arrangements during medical emergencies.

Future Outlook and Sector Evolution

As the sector enters 2026, the momentum from 2025 positions it well for continued growth and transformation. The 11 percent increase in claim payouts reflects both expanded coverage and greater utilisation of policy benefits by insured individuals. With healthcare costs continuing to rise and medical inflation remaining a persistent concern, the role of health insurance in providing financial protection has become increasingly critical for Indian households.

The improvements in settlement ratios, the decisive shift toward cashless treatments, and the expansion of coverage across government, group, and individual segments all indicate a maturing industry. However, penetration remains relatively low compared to developed markets, suggesting significant potential for further growth.

The sector now faces the dual challenge of expanding coverage while maintaining operational sustainability. Balancing growth with efficient claim management, ensuring adequate protection against rising healthcare costs, and maintaining affordable premium structures will be critical priorities for insurers in the coming years.

The data from FY25 demonstrates that Indian insurers are making steady progress toward building a more robust, accessible, and reliable health insurance ecosystem that serves the diverse needs of the country’s vast population.