India’s health insurance sector is losing an estimated Rs 8,000 crore to Rs 10,000 crore annually to fraud, waste, and abuse (FWA), according to a joint report by Medi Assist and Boston Consulting Group.
These leakages, roughly 8–10percent of total claim payouts, are inflating premiums, eroding insurer margins, and straining public resources, the report said.
Fraud hotspots are concentrated in retail health policies, reimbursement claims, and mid-ticket bills, the report said.
The report added that retail portfolios exhibit up to 20 times higher fraud risk than group policies, driven by misrepresentation of pre-existing conditions and weak verification.
Reimbursement claims, where members pay upfront and seek refunds, carry far greater fraud propensity than cashless claims due to retrospective documentation and minimal scrutiny. Fraud also clusters around mid-ticket claims between Rs 50,000 and Rs 2.5 lakh, large enough to tempt manipulation yet small enough to escape rigorous audits.
Infectious disease claims top the risk charts
The report says Infectious disease claims top the risk charts, with six times higher fraud propensity than surgical categories, owing to vague symptoms and test-heavy billing.
The other frauds the report identifies include real-world scenarios that range from phantom billing for procedures never performed to upcoding of room categories and prolonged weekend stays that inflate costs. Identity swaps, where patients borrow IDs to access coverage, further complicate detection.
The report highlights that systemic weaknesses exacerbate the problem: fragmented data across insurers and hospitals creates blind spots, while reactive audits and manual checks fail to catch anomalies early.
"Misaligned incentives reward providers for volume rather than outcomes, normalising overbilling. Legal deterrence remains weak, with no dedicated penal code for insurance fraud; most cases end with claim rejection rather than prosecution," the report said.
To counter this, Medi Assist has launched MAven Guard, an AI-powered integrity platform designed for real-time fraud detection using self-learning algorithms, alongside MAgnum, a hospital enablement solution to streamline cashless workflows.
The report calls for a three-pillar strategy: prevention through connected care and predictive monitoring, detection via AI-driven adjudication and anomaly scoring, and deterrence through legal guardrails and trust scores for providers and members.
Cutting FWA by 50 percent could lift sectoral return on equity by 35 percent, enabling insurers to lower premiums and expand coverage. Failure to act risks a spiral of higher premiums, lower penetration, and worsening health outcomes.
“The next decade will be defined by connected data and intelligent automation,” said Satish Gidugu, CEO of Medi Assist. “AI is no longer optional—it’s the backbone of trust,” he added.
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