Why do health insurance claims get rejected?

Health insurance claims are rejected when the claim does not meet the policy terms agreed at purchase. The five most common reasons are non-disclosure of a pre-existing condition, treatment falling inside a waiting period, treatment listed as a policy exclusion, incomplete or mismatched documentation, and delayed intimation to the insurer. Under the IRDAI Master Circular on Health Insurance Business dated 29 May 2024, the insurer must state the reason for rejection in writing, and the policyholder can escalate through Bima Bharosa or the Insurance Ombudsman.

What are the most common reasons for claim rejection?

Five reasons account for most rejected claims in India:

• Non-disclosure of pre-existing conditions: The insurer discovers a condition that existed before the policy start but was not declared in the proposal form. Under IRDAI rules, PED is defined as any condition diagnosed or treated within 36 months before policy commencement.
• Treatment inside a waiting period: Claims filed for specified illnesses or PED before the applicable waiting period is complete. For retail policies, the maximum PED waiting period is 36 months under the IRDAI Insurance Products Regulations, 2024.
• Policy exclusions: Treatment falls under a permanent exclusion listed in the policy, such as cosmetic surgery, dental (without accident), or unproven treatments.
• Incomplete documentation: Missing hospital bills, unsigned discharge summary, or unverifiable diagnostic reports.
• Delayed intimation: The insurer was not informed of the hospitalisation within the timeline stated in the policy (usually 24 to 48 hours).

Can a claim still be rejected after 5 years of continuous cover?

No, except in cases of proven fraud. The IRDAI Master Circular 2024 reduces the moratorium period from 96 months to 60 months. After 60 continuous months of coverage, the insurer cannot reject a claim on grounds of non-disclosure or misrepresentation, except where deliberate fraud is proven. Policy sub-limits, co-payments, and permanent exclusions still apply.

What is the difference between rejection and short settlement?

Rejection means the insurer refuses to pay any portion of the claim. Short settlement means the insurer pays less than the claimed amount, typically because of room rent sub-limits, co-payments, non-medical charges, or amounts above the sum insured. Rejection can be contested end to end; short settlement can be contested for the disputed portion only.

How can employees prevent claim rejection?

Prevention starts at policy purchase and continues through claim submission:

• Declare all pre-existing conditions in the proposal form, even minor or long-controlled ones.
• Intimate the insurer or TPA within 24 hours of any admission.
• Confirm the hospital is on the insurer's network or eligible under Cashless Everywhere before admission.
• Submit all requested documents in one complete set rather than in parts.
• Match the diagnosis code on the hospital bill with the discharge summary.

What should an employee do if a claim is rejected?

Request the written rejection letter from the insurer, which must state the specific policy clause invoked. Compare this against the policy wording and gather any supporting medical evidence that refutes the reason. Submit a written representation to the insurer's grievance officer within 15 days. If the response is unsatisfactory, escalate to IRDAI's Bima Bharosa portal or the Insurance Ombudsman, which can award compensation up to Rs 50 lakh.

How Plum approaches this

Plum reviews every claim rejection on Plum-managed group policies before it reaches the employee, checking whether the stated reason holds against the policy terms and, where it does not, pushing the insurer or TPA to reconsider. Plum's claims NPS of 79 reflects this active involvement across the claims process, and cashless pre-authorisation clears in a median of 45 minutes across the book. Plum works with partner insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance, and places group cover for employers from 7 employees upward, with rejection reasons tracked at portfolio level so recurring gaps can be addressed at renewal.

Frequently asked questions

Can a claim be rejected if the employee forgot to intimate the insurer?

Not automatically. If the delay was due to a genuine emergency and the claim is otherwise payable, IRDAI rules state the insurer should not reject purely on procedural grounds.

Is a claim rejected if the hospital is not on the network?

No. Under IRDAI's Cashless Everywhere framework dated 23 January 2024, cashless is available at any registered hospital, and reimbursement claims are payable regardless of network status.

What if the insurer rejects for non-disclosure of a minor condition?

The insurer must show the non-disclosed condition was material to the claim. If the condition is unrelated to the treatment claimed, the rejection can be contested.

How long does the insurer have to respond to a grievance?

The IRDAI grievance framework requires insurers to respond within 15 days of receipt. If unresolved, the employee can escalate to Bima Bharosa within 30 days and to the Insurance Ombudsman within 90 days.

Can a rejected claim be reopened after escalation?

Yes. The Insurance Ombudsman and IRDAI both have the authority to direct an insurer to reprocess a claim if the rejection is not aligned with policy terms.

Does group health insurance have the same rejection rules as retail?

The IRDAI framework applies uniformly, though group policies typically waive PED waiting periods, which reduces the most common rejection reason for retail claims.