Inside India’s Insurance System: Costs, Claims, and Your Rights
A few months ago, Delhi-based teacher Renu Sharma paid ₹3.2 lakh for her father’s heart surgery. She had a cashless health insurance policy, yet the hospital told her that the insurer had “not approved” the procedure. The company later rejected the claim citing a pre-existing condition she had never heard of.
In Mumbai, IT professional Sagar Patel’s car was hit by a speeding SUV. His insurer agreed to cover only 60% of the repair cost, ruling the rest as “consumables,” “plastic parts,” and “depreciation”—terms he discovered only after the accident.
And in Jaipur, a small-business owner named Imran Khan paid premiums for 11 years for a life insurance plan sold as an “investment”. When he matured the policy, he realised that he earned less than a fixed deposit, while the insurer charged multiple hidden fees throughout.
These stories are not rare—they represent the everyday reality of millions of Indians who trust insurance companies but often feel betrayed at the moment they need support the most.
Why India’s Insurance System Feels Broken
India’s insurance sector has expanded massively over the last two decades. Companies advertise peace of mind, guaranteed protection, and cashless benefits. However, when customers file claims, they face rejections, delays, and unexplained deductions.
Insurance companies function on a simple business model:
They collect premiums from lakhs of customers but pay out claims only after assessing risk, exclusions, and fine print. Ideally, this keeps the system stable. Yet many customers believe that insurers weaponise technicalities to reduce payouts.
As premiums rise each year—sometimes by 30–40% in health insurance—customers ask a valid question:
Are insurance companies genuinely protecting people, or are they protecting their own balance sheets?
The Insurance Regulatory and Development Authority of India (IRDAI) says claim settlement ratios have improved. However, consumer courts are flooded with cases of denied claims, misleading sales, and non-transparent practices.
The Fine Print Problem — And What Really Happens Behind the Scenes
Insurance executives often admit privately:
“Most customers don’t read the policy document.”
This is where trouble begins. Insurance contracts are filled with exclusions, sub-limits, co-payments, non-payable items, and technical clauses. Many companies recover high costs by shifting the financial burden onto clients during claim time.
Hospitals also play a role. Some inflate bills, add unnecessary tests, or charge higher rates for insured patients. Insurers respond with stricter audits and more rejections. In this tug-of-war, the customer suffers.
Life insurance has its own maze. Traditional plans offer low returns, while ULIPs have high charges. Agents often mis-sell policies to earn commissions. As a result, millions of people end up paying years of premiums for products that do not match their financial needs.
Although IRDAI has introduced reforms—like standard health insurance plans and simplified terms—large gaps remain. Many customers still feel like insurance protects them only on paper, not in reality.
India Needs Honest Insurance, Not Just Expansion
Insurance is essential in a country where medical inflation rises by 12–14% annually and accidents are increasing. However, the current system leaves many families confused, helpless, and angry at the time of crisis.
Prerna Varshney is a journalist and social commentator with over five years of experience in health, gender, and policy reporting. Her work reflects a deep commitment to truth and empathy, simplifying complex issues for everyday readers.
