The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a penalty of Rs 1 crore on Care Health Insurance Ltd following a remote inspection that revealed serious lapses in health insurance claim settlement, transparency, grievance redressal and financial reporting practices. The regulator has directed that the penalty be paid from the company’s shareholders’ account within 45 days and placed before its board, with an action-taken report due within 90 days.
According to IRDAI’s detailed order dated December 15, 2025, the watchdog found multiple deficiencies in how Care Health handled cashless claims, including missing patient or attendant signatures on discharge summaries and summary bills, and reductions in claim amounts by applying hospital discounts and tariff differences without adequately reflecting these in final hospital bills. In many cases, policyholders were not aware of the actual bills raised by hospitals. IRDAI also observed that settled amounts were lower than the final bills submitted for cashless claims, with settlements being communicated primarily to hospitals and not transparently to insured customers.
The regulator also reprimanded Care Health for failing to send detailed claim settlement letters to policyholders, which should have clearly outlined deductions, disallowed amounts and reasons for short payments or repudiations. Instead, IRDAI noted that customers often received only cursory communication, and email logs submitted by the insurer were deemed insufficient proof that policyholders had been properly informed about how their claims were processed. The authority held that such practices reflected a disregard for transparency and policyholder rights in the critical area of claims settlement.
On the grievance redressal front, IRDAI found that when complaints were not resolved in favour of policyholders, Care Health did not consistently inform them of their right to approach the Insurance Ombudsman, along with the relevant ombudsman’s name and address. Closure and repudiation letters typically carried only customer care contact details, an email ID and a vague hyperlink, placing what the regulator called an “undue burden” on policyholders to discover escalation mechanisms on their own.
The inspection further uncovered delays in addressing serious cybersecurity weaknesses, which were not rectified within the timelines prescribed by IRDAI. In addition, the regulator flagged the way Care Health accounted for certain reinsurance arrangements, noting that the recording of transactions had the effect of making the insurer’s profits and financial strength appear better than they actually were. IRDAI also observed that Rs 1.06 crore received as proposal deposits had been parked in an unallocated premium account for over six months without being transferred to the unclaimed amounts account, terming the indefinite retention of such funds unethical and contrary to policyholder protection norms.
In its submissions, Care Health argued that Insurance Ombudsman details had been shared via a hyperlink because the information was “variable in nature” and informed IRDAI that it has since modified processes to include specific ombudsman details in all grievance resolution and claim rejection letters. On cashless claims, the insurer maintained that customers were copied on email communications sent to hospitals and that discounts were passed on to policyholders, and said that digitisation was underway to improve transparency, while also blaming some network hospitals for their inability to reflect discounts on bills due to multiple tariff structures and IT constraints.
With respect to reinsurance, the company told IRDAI it had discontinued net rate treaties with GIC Re from FY 2023–24 and currently has no such treaties with any reinsurer. On the Rs 1.06 crore lying in the unallocated premium account, Care Health contended that these amounts were proposal deposits during the policy currency and did not qualify as “unclaimed” funds of policyholders.
After weighing the submissions, IRDAI imposed a monetary penalty specifically for serious lapses related to claim settlement and communication, while issuing warnings and advisories on the other charges, with a clear caution that any repeat violations would invite stronger regulatory action. The order underscores that clear, timely and detailed communication on claims and grievance rights is non-negotiable, and that remedial steps taken later cannot erase violations that have already impacted policyholders.
For policyholders, the ruling serves as a reminder to closely scrutinise hospital bills, claim settlement summaries and insurer communications, and to insist on detailed explanations for deductions or rejections. It also reinforces the importance of escalating unresolved grievances to the Insurance Ombudsman, whose role IRDAI has emphasised as a key part of the consumer protection framework in India’s health insurance market.
