Why Insurance Claims Get Rejected

'Many policyholders do not understand that non-medical expenses, cosmetic treatments, and certain other procedures are not covered by health insurance policies.'

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IMAGE: Couple reviews rejected insurance claim.

Complaints related to health insurance claims are rising.

According to data presented by Minister of State for Finance Pankaj Choudhury, 64,365 complaints were registered on the Bima Bharosa portal in 2024-2025 (FY25).

This figure had already touched 73,729, 14.5 per cent higher than the previous year, in 11 months of FY26.

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Key Points

Health insurance complaints surged, with over 73,000 cases recorded in FY26, reflecting rising disputes in claim settlements.
Claims are often rejected due to non-disclosure, waiting periods, policy lapses, or treatments not meeting insurer criteria.
Partial settlements occur due to room rent caps, co-pay clauses, sub-limits, and differences in hospital billing structures.
Experts advise careful policy selection, full disclosure of medical history, and preference for network hospitals to avoid disputes.
Policyholders can escalate rejected claims through insurers, regulators, ombudsman, or courts depending on claim size and resolution.

Why claims get rejected

Claim rejection often stems from a poor understanding of policy terms.

"Many policyholders do not understand that non-medical expenses, cosmetic treatments, and certain other procedures are not covered by health insurance policies," says Arun Ramamurthy, co-founder, Staywell.Health.

Non-disclosure of pre-existing diseases, like diabetes, high blood pressure, thyroid disorders, and so on, or past treatments can result in denial of claim.

Claiming during a waiting period may also result in rejection.

Claims may also not be paid if the treatment does not meet the insurer's criteria for medical necessity.

A lapsed policy, fraud, or discrepancies in documents can also trigger a denial.

Why claims are partially paid out

Partial claim settlements usually arise because the policy comes with certain restrictions.

Room rent caps can trigger proportionate deductions across the entire bill.

"If the policyholder chooses a room category above the permitted limit, that can reduce the payout by 20 to 40 per cent," says Saurabh VijayVergia, founder and CEO, CoverSure.

Co-pay clauses, sub-limits on specific treatments, and exclusion of consumables can lower the payout. Differences in package rates with the hospital can also result in partial settlement," says Ramamurthy.

Pre-purchase checks

Understand what the policy covers and its exclusions, instead of blindly going for the cheapest policy.

A suitable policy should preferably have no room rent cap, minimal or no sub-limits, and low or no co-pay.

"Check whether the policy offers restoration benefit, has short waiting periods for pre-existing diseases, and provides access to a strong hospital network," says Ramamurthy.

Make full disclosures

Many claim disputes occur because policyholders did not disclose all relevant information in the proposal form.

"People skip mentioning existing conditions and past treatments," says VijayVergia.

Some fail to mention information regarding lifestyle habits, such as smoking or alcohol consumption.

Buyers should also disclose existing policies.

Avoiding disputes in reimbursement claims

Sometimes, a major hospital may not be part of your insurer's network.

"That may be because the insurer has concerns about its charges," says Kapil Mehta, co-founder, SecureNow Insurance Broker.

Policyholders should prefer network hospitals whenever possible.

"If they opt for a non-network hospital, they should be prepared for reimbursement instead of cashless treatment," says Shilpa Arora, co-founder and chief operating officer, Insurance Samadhan.

Before getting admitted, inform the insurance company or third-party administrator (TPA).

"Submit a claim file within 30 days of discharge," says Arora.

She adds that the claim form should be filled out accurately, with all details, and be accompanied by original documents.

If claim is fully or partially rejected

After rejecting a claim or making a partial settlement, the insurer must issue a detailed settlement letter explaining what has not been paid and why.

"The insurer should list even small rejected items separately and state the reasons for not settling them," says Mehta.

Before escalating the matter, approach the insurer's grievance redressal officer for clarification and reconsideration.

"If that does not resolve the matter, escalate the complaint to the regulator via the Bima Bharosa portal," says Mehta.

If that also fails, file a complaint with the insurance ombudsman.

Civil and consumer courts are an option, but the process is usually lengthy.

"If the claim amount exceeds Rs 50 lakh and falls outside the ombudsman's jurisdiction, approach a consumer court," says Arora.

Documents you should have available

At admission: Policy copy or health card, identity proof, doctor's prescription, admission notes and advice
At discharge: Itemised hospital bills, discharge summary with diagnosis details, diagnostic reports, test results, pharmacy bills with prescriptions, payment receipts, implant details, KYC documents
Complete, signed, error-free original documents and accurately filled and signed claim form

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