New Delhi: The insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI), has imposed a ₹10 million (₹1 crore) penalty on Care Health Insurance Limited for multiple and serious irregularities in health insurance claim settlement processes. The regulator said the company’s conduct amounted to violations of policyholder protection norms, transparency requirements and corporate governance standards.
The action follows a detailed remote inspection, culminating in a comprehensive order issued on December 15, 2025. Along with the monetary penalty, IRDAI has issued formal warnings and corrective directives to the insurer.
Failure in Grievance Redressal, Ombudsman Details Withheld
According to the regulator, Care Health Insurance failed to adequately inform policyholders about their right to approach the Insurance Ombudsman when grievances were not resolved in their favour.
IRDAI noted that rejection and grievance response letters merely contained customer care contact details, an email ID or a generic hyperlink, without clearly specifying the name, jurisdiction or address of the relevant Ombudsman. The regulator held that such practices place an unfair burden on policyholders and restrict their ability to exercise statutory rights.
Cashless Claim Settlement: Most Serious Violation
The most severe breach, which formed the primary basis for the ₹10 million penalty, related to cashless claim settlement procedures. The inspection revealed multiple deficiencies, including:
- Absence of patient or attendant signatures on discharge summaries and hospital bills
- Deductions made for hospital discounts or tariff differences without disclosure in final bills
- Failure to share the actual hospital bill amount with policyholders
- Settlement amounts paid directly to hospitals without clear communication to insured individuals
- Non-issuance of detailed settlement letters explaining deductions, disallowed amounts and reasons
IRDAI observed that only 31% of sampled cases carried mandatory signatures, meaning 69% of claims failed to meet basic documentation standards. The regulator categorically stated that email logs alone cannot be treated as proof of effective and reliable communication with policyholders.
Cyber Security and Reinsurance Accounting Under Scrutiny
The regulator also flagged serious cyber security shortcomings, noting that previously identified vulnerabilities were not rectified within prescribed timelines.
In addition, IRDAI raised concerns over reinsurance accounting practices, stating that certain methods adopted by the insurer had the effect of presenting a stronger financial position than warranted.
A particularly serious observation involved ₹10.6 million worth of unidentified proposal deposits, which remained parked in an unallocated premium account for over six months. IRDAI termed this practice unethical and contrary to policyholder protection regulations.
Company’s Defence and Regulator’s Final View
In its submissions, Care Health Insurance argued that its processes were being upgraded, digitisation initiatives were underway, and operational challenges often arose due to coordination with hospitals.
IRDAI, however, rejected these explanations, stating that post-facto corrective measures do not absolve past violations, especially when policyholder interests have been adversely affected.
Invoking Section 102 of the Insurance Act, 1938, the regulator directed the company to deposit the penalty amount within 45 days from its shareholders’ account. The order must be placed before the Board of Directors, and an action-taken report is to be submitted within 90 days.
What This Order Means for Policyholders
IRDAI has sent a clear regulatory signal that transparency in claims, timely disclosure and protection of policyholder rights are non-negotiable. The regulator reiterated that subsequent system improvements cannot nullify earlier lapses.
The order is being viewed as a strong warning to the health insurance industry, underlining that negligence in claim settlement and grievance handling will invite strict regulatory action.
