In a landmark enforcement action, the Insurance Regulatory and Development Authority of India (IRDAI) has slapped a Rs 1 crore penalty on Care Health Insurance for repeatedly failing to settle health‑insurance claims within the mandated timelines. The move underscores the regulator’s growing vigilance over claim‑settlement practices, a sector that has long been plagued by delays and disputes. Policyholders, industry observers, and competitors are watching closely as the penalty signals a stricter compliance regime. This article unpacks the regulatory backdrop, the specific lapses identified, the broader impact on consumers and the market, and the steps Care Health Insurance is taking to remediate the breach.
Regulatory backdrop and the penalty
The IRDAI, empowered by the Insurance Act, 1938 and subsequent amendments, mandates that insurers settle health‑claim payouts within 30 days of receipt of all required documents. Non‑compliance attracts monetary penalties, suspension of licences, or even cancellation. In June 2024, the regulator issued a show‑cause notice to Care Health Insurance after a pattern of delayed settlements emerged across multiple states. After a detailed audit, the IRDAI confirmed that the insurer had breached the 30‑day rule in more than 150 cases, leading to a Rs 1 crore fine announced in July 2024.
The lapses that triggered the fine
IRDAI’s investigation highlighted three core deficiencies:
- Systemic delay: Over 60% of the flagged claims were settled beyond the 30‑day window, with some extending to 90 days.
- Inadequate documentation verification: The insurer relied on manual checks, causing bottlenecks and inconsistent approvals.
- Lack of transparent communication: Policyholders reported receiving vague status updates, often without clear reasons for postponement.
These shortcomings not only violated regulatory timelines but also eroded trust among millions of policyholders who depend on timely medical reimbursements.
Impact on policyholders and industry practices
For affected policyholders, delayed payouts translate into out‑of‑pocket expenses during critical health emergencies. A recent survey by the Consumer Advocacy Forum found that 42% of respondents who filed health‑insurance claims experienced financial strain due to settlement delays. The penalty serves as a cautionary tale for other insurers, prompting many to review and upgrade their claim‑processing workflows. Industry bodies such as the General Insurance Council have already urged members to adopt automated claim‑management systems to mitigate similar risks.
Care Health Insurance’s response and remediation steps
Following the IRDAI’s order, Care Health Insurance issued a public statement acknowledging the lapses and outlining a remediation roadmap:
- Implementation of an AI‑driven claims triage platform to accelerate document verification.
- Hiring of 200 additional claim‑processing staff across regional offices.
- Launch of a dedicated helpline for real‑time claim status updates.
- Periodic audits by an independent third‑party to ensure compliance with the 30‑day rule.
The insurer has also committed to reimbursing policyholders who faced undue delays, with a provisional fund of Rs 5 crore earmarked for this purpose.
Looking ahead: strengthening claim settlement compliance
Regulators are expected to tighten oversight further, with proposals to introduce a “claims settlement scorecard” that publicly ranks insurers based on their average settlement time. Such transparency could empower consumers to make informed choices and incentivize insurers to prioritize speed and accuracy.
| Date | Event |
|---|---|
| 15 Jun 2024 | IRDAI issues show‑cause notice to Care Health Insurance |
| 01 Jul 2024 | Rs 1 crore penalty imposed; public announcement |
| 10 Jan 2025 | Care Health unveils AI‑driven claims platform |
| 18 Dec 2025 | Current status – compliance monitoring ongoing |
Conclusion
The IRDAI’s decisive action against Care Health Insurance marks a pivotal moment in India’s health‑insurance landscape, emphasizing that timely claim settlement is not a courtesy but a regulatory obligation. While the Rs 1 crore penalty sends a strong deterrent signal, the real test lies in how insurers overhaul their processes to restore policyholder confidence. As the sector moves toward greater digitisation and transparency, both regulators and insurers must collaborate to ensure that health‑coverage truly delivers when it matters most.
Image by: Mikhail Nilov
https://www.pexels.com/@mikhail-nilov
