Mumbai: India’s health insurance sector is experiencing systemic leakages estimated at ₹10,000 crore annually, driven by fraud, waste and abuse (FWA), according to a new industry report titled “Rebuilding Trust: Combating Fraud, Waste, and Abuse in India’s Health Insurance Ecosystem.”
The study warns that entrenched fraudulent behaviour, including inflated bills, unnecessary medical procedures, document manipulation and billing irregularities, has become widespread across the value chain— impacting insurers, hospitals, and beneficiaries.
“Leakages are silently eroding trust and weakening the insurance ecosystem. Unless stakeholders collectively act, the impact on premiums, public spending and coverage expansion will intensify,” the report notes.
₹1.27 Lakh Crore Health Insurance Market at Risk
India’s health insurance industry has grown rapidly, reaching ₹1.27 lakh crore in FY2025, clocking almost 17% CAGR in the past five years.
The momentum is expected to continue, with the sector projected to touch ₹2.6–3 lakh crore by 2030, driven by greater protection awareness, digital expansion, and evolving regulatory reforms such as composite licensing.
Despite this growth, the report highlights a deep structural concern:
| Claim Type | Share of Total Claims |
|---|---|
| Genuine / Risk-free claims | 90% |
| Fraudulent claims | 2% |
| Inefficient / Suspicious cases | 8% |
While outright fraud stands at 2%, the 8% segment is identified as the biggest savings opportunity, as inefficiencies and weak process checks inflate insurance payouts without necessarily denying legitimate care.
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AI Seen as Game-changer for Prevention
The report emphasises that digital technologies, especially AI and Generative AI, could transform fraud management from a manual, reactive approach to an automated, predictive framework. Instead of detecting wrongdoing after claims disbursement, AI-led platforms could introduce real-time verification, anomaly detection, behavioural pattern monitoring, and cross-insurer data interoperability.
“Harnessing interoperable platforms and digital intelligence can expedite fraud targeting and restore confidence in the insurance ecosystem,” said Swayamjit Mishra, Managing Director & Partner at BCG.
The proposed three-pillar strategy includes:
- Prevention: smart policy frameworks, digital verification, standard operating protocols
- Detection: AI-based monitoring, risk scoring, fraud pattern analytics
- Deterrence: stronger penalties, regulatory compliance tracking, hospital empanelment reforms
No Longer Limited to Major Medical Hubs
The report also challenges a common perception — that fraud and inflated claims are concentrated in major hospital clusters such as Mumbai, Delhi, Hyderabad or Bengaluru.
Instead, fraud patterns are now geographically dispersed, reflecting rising medical digitisation, insurance penetration, and increased dependence on third-party agents and intermediaries.
Leakages Affecting Customers
Financial losses linked to FWA are not merely administrative — they translate into:
- Higher insurance premiums
- Strain on government-funded health schemes
- Reduced profit margins for insurers
- Longer claim settlement timelines
- Delayed processing for genuine policyholders
“Digital trust needs to be hardwired into India’s insurance infrastructure to ensure that affordability and accessibility are protected,” said Satish Gidugu, CEO, Medi Assist.
A Shift Needed to Protect India’s ‘Insurance for All’ Vision
With the government pushing toward universal health coverage, experts warn that failure to curb fraud could slow down policy adoption and raise long-term healthcare costs. The report concludes that with technology reform, governance discipline and data standardisation, India could accelerate its Insurance-for-All mandate by up to five years.
