From Claim to Settlement: A Step-by-Step Guide to Health Insurance Claim Settlement Process

Mar 16, 2024 / Reading Time: Approx. 7 mins

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In the intricate web of financial planning in India, health insurance stands out as a safeguard against the uncertainties of medical emergencies. It is a reassuring safety net, ensuring that policyholders can navigate unforeseen health challenges without undue financial strain. However, amidst the intricacies of policy selection, many individuals overlook a fundamental aspect: the claim settlement process.

Underestimating the significance of claim settlement can prove to be a costly mistake. While purchasing a health insurance policy, individuals often prioritise premiums and coverage over understanding the mechanisms of claim settlement. However, the reality is stark: the efficiency and effectiveness of the claim settlement process can significantly impact one's peace of mind during a medical crisis.

This article is your step-by-step guide to health insurance claim settlement in India. We understand that when a medical emergency occurs, the last thing one wants is the added stress of navigating a claims settlement process. Hence, in this article, we elucidate this crucial aspect of health insurance, providing a comprehensive understanding of the claim settlement process under various circumstances.

Before we delve into the health insurance claim settlement process, let us understand what a health insurance claim is.

A health insurance claim settlement involves a policyholder submitting a formal request to their insurance provider to access the benefits outlined in their policy when facing a medical emergency. When a covered incident occurs, such as an accident, illness, or injury, the policyholder files a claim with their insurance company to receive financial aid or reimbursement according to the terms and conditions outlined in the insurance policy.

As you might already know, there are two types of claim settlement processes that an insurer can follow:

  1. Cashless Claim Settlement Process

  2. Reimbursement Claim Settlement Process

The General Insurance Council, in collaboration with general and health insurance companies, has recently introduced a "Cashless Everywhere" initiative. This innovative program extends the coveted cashless facility to policyholders seeking medical treatment at hospitals that may not be included in the insurers' existing list of network hospitals.

You can read more about it in this article: 'Cashless Everywhere' Initiative Empowers Policyholders Beyond Network Hospitals.

While most individuals prefer to use a cashless process, and the 'Cashless Everywhere' initiative will boost the usage of cashless processes in order to make the claim journey easier for policyholders, there could still be instances when you might have to opt for a reimbursement process. Hence, it is best to be aware of both the processes.

[Also Read: 12 Tips to Buy the Right Health Insurance Plan]

Let's start with the cashless claim settlement process.

1. Cashless Claim Settlement Process:

In the cashless claim settlement process, the insurance company handles the payment directly with the hospital, streamlining the process for the policyholder. A notable benefit for the policyholder is the elimination of out-of-pocket expenses, except any deductible (if applicable). Furthermore, since the claim is resolved directly, the policyholder is relieved of the burden of managing hospital bills and subsequent reimbursement.

A Step-by-Step Guide to the Cashless Claim Settlement Process:

  • When seeking medical care, the policyholder can choose from a network of hospitals affiliated with the insurance company, presenting their health insurance policy details.

  • Most hospitals feature dedicated departments or desks for insurance claim processing, where the policyholder can present either a physical copy of the policy or an e-card provided by the insurer. Opting for a cashless claim settlement necessitates providing evidence of the policy's validity.

  • The hospital verifies the policy particulars and submits a pre-authorisation form to the insurer.

  • The insurance company confirms the policy details and proceeds with the claim settlement as per the policy's terms and conditions.

  • The settlement occurs directly between the hospital and the insurance company, simplifying the reimbursement process for the policyholder.

There are two scenarios where a policyholder may need to initiate a claim:

Planned Hospitalisation:

In cases where a policyholder is aware of upcoming surgery or medical treatment, preplanning is essential. Informing the insurer in advance about the intended treatment and the chosen network hospital is necessary. This notification can be carried out through various channels:

  • Contacting the insurer via their toll-free or customer service number

  • Sending an email to the customer service department

  • Mailing a letter to the registered address of the insurance company

Additionally, a cashless settlement form completed by the hospital, must be submitted to the insurer. This form can be transmitted via email, fax, or mail.

Once these steps are completed, the insurance company liaises with the hospital and notifies the policyholder upon acceptance of the claim.

At the time of hospital admission, the policyholder must present their policy or e-card.

Emergency Hospitalisation:

Medical emergencies can occur suddenly, without warning, typically resulting from accidents or acute illnesses necessitating immediate treatment. In such circumstances, it is crucial for the policyholder or their family members to promptly inform the insurance company by calling the toll-free number.

While it's possible that family members may fail to notify the insurer beforehand, immediate communication is imperative once the patient is admitted to the hospital.

Moreover, family members must ensure that a cashless claim settlement form, completed by the hospital, is promptly dispatched to the insurer within 24 hours of hospitalisation.

2. Reimbursement Claim Settlement Process:

In the Reimbursement Claim Settlement Process, the policyholder is required to settle all hospital bills and additional medical expenses upfront, unlike the streamlined and convenient cashless claim settlement process.

This method involves the policyholder claiming reimbursement afterwards by presenting the original hospital bills.

While this process can pose challenges for the insured, it does afford them the flexibility to select their preferred hospital, even if it is not affiliated with the insurer's network hospitals.

[Also Read: Health Insurance on a Budget: Maximising Coverage and Minimising Costs]

A Step-by-step Guide to the Cashless Claim Settlement Process:

  • Upon discharge from the hospital and settling all bills, the reimbursement claim settlement process commences for the policyholder.

  • To initiate the claim, the policyholder must submit the reimbursement form, along with original hospital bills, and other required documents such as medical reports, medication receipts, discharge card, discharge summary, and in the event of an accident, a First Information Report (FIR). Should any document be absent, the insurer may suspend the claim until all necessary documents are provided.

  • In instances where field verification is necessary, the insurer may take the help of a third-party administrator.

  • Upon confirming the legitimacy of the claim, the insurance company proceeds with processing it.

  • In the event of claim rejection, the policyholder is promptly notified via phone call or email.

  • Successful claim settlements result in the transferred claim amount to the policyholder's registered bank account.

These are the primary types of health insurance claim settlement processes. While some insurers handle claim settlements through in-house departments, others use third-party administrators (TPAs) authorised by the Insurance Regulatory and Development Authority of India (IRDAI). Let's delve into the specifics of each method:

Third-Party Administrator (TPA):

  • Several insurers collaborate with TPAs sanctioned by the IRDAI.

  • TPAs function as intermediaries, expediting the claim settlement process by managing documentation. However, they lack the authority to accept or reject claims, which remains with the insurer.

  • The policyholder interacts with the TPA for updates or document submissions upon claim processing.

  • Given the intermediary involvement, the process can be protracted, with over 25 licensed TPAs in India primarily serving public sector health insurance companies.

  • TPAs often boast expansive hospital networks, facilitating cashless claim settlements.

In-House Claim Settlement Department:

  • Many insurers, especially private, now operate in-house claim settlement departments.

  • With no intermediary involved, the process is seamless and swift, overseen directly by the decision-maker.

  • This approach offers policyholders a single point of contact, enhancing convenience throughout the claim settlement process.

To conclude:

Understanding the Health Insurance Claim Settlement Process is essential for making informed decisions, ensuring adequate coverage, and minimising potential challenges during the claims process. It empowers individuals to choose the right policy for their needs and manage their healthcare expenses more effectively. When feasible, opting for a cashless claim settlement process eliminates upfront payments, streamlining the claim acceptance process.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.


Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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