The Insurance Regulatory and Development Authority of India (IRDAI) has identified significant irregularities in the claim settlement practices of Star Health and Allied Insurance, as per a CNBC-TV18 report.
While the investigation is still underway, the regulator is expected to take appropriate action against the insurer. Apart from Star Health, IRDAI has also reviewed the claim-handling processes of 8-10 other general and health insurance providers. However, no enforcement measures have been reported against them so far.
Star Health Denies Any Official Communication
In response to the allegations, Star Health issued a statement, clarifying that it has not received any formal communication from IRDAI regarding the matter. The company reiterated its commitment to a customer-centric approach, ensuring compliance with industry best practices.
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It further emphasized that regulatory audits and inspections are routine processes aimed at maintaining transparency and accountability across the insurance sector. Star Health also dismissed the media reports as speculative and misleading.
Claim Settlement Performance Raises Concerns
According to IRDAI’s insurance statistics handbook, Star Health’s incurred claim ratio—the percentage of premium revenue paid out as claims—stood at 66.47% in 2023-24. This is slightly above the average 63.63% for stand-alone health insurers but significantly lower than the 82.52% industry-wide average for general and health insurers.
High Rejection Rates & Delayed Settlements
Star Health recorded the lowest claim settlement ratio within three months among stand-alone health insurers, standing at 82.31% in 2023-24. The insurer also had a notable backlog, with a fraction of claims taking over two years to settle.
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Moreover, Star Health rejected 2,96,356 claims in FY 2023-24—the highest in the sector—far exceeding its closest competitor, Care Insurance, which denied 76,903 claims. Other insurers, including Aditya Birla Health (57,414), Niva Bupa (55,185), and Manipal Cigna (50,480), reported significantly lower rejection figures.
Highest Complaints Among Private Insurers
Star Health also topped the list in policyholder grievances, with 16,804 complaints filed in FY 2023-24—the highest among all private insurers. It was second only to National Insurance Co. Ltd., which recorded 1,638 pending grievances at the start of the year.
With IRDAI tightening its scrutiny on claim settlement practices, the insurance watchdog’s next steps against Star Health remain highly anticipated.