India’s health insurance system is losing around Rs 8,000–10,000 crore annually on claim-payout leakages arising from fraud, waste and abuse (FWA), according to a report by Boston Consulting Group (BCG) and Medi Assist Healthcare, the country’s largest health insurance third-party administrator.
The report notes that fraudulent practices and fake claims inflate premiums, erode insurer margins, and strain public resources. “Fraudulent behaviours, process inefficiencies, and policy violations have become embedded across the value chain. Rather than isolated incidents, these practices are now systemic and rising,” the report said.
AI-Powered Solution
To tackle this, the report proposes a three-pillar framework of Prevention, Detection and Deterrence built on standardisation, technology and data interoperability. It highlights how advancements in Artificial Intelligence (AI) and Generative AI (GenAI) can shift claims processing from a post-facto policing model to a proactive, real-time fraud-prevention system.
According to Swayamjit Mishra, Managing Director and Partner, Core Member Financial Services and Technology Lead in Insurance, APAC, BCG, about 90% of health insurance claims are risk-free, while 2% are outright fraudulent and continue to be flagged today. “The real opportunity lies in the remaining 8%, where inefficiencies and abuse can be addressed without inconveniencing genuine policyholders,” he adds.
The report stresses that FWA is systemic, not sporadic, and that the challenge is now deeply embedded across geographies, processes and behaviours in both urban and rural settings. It adds that disconnected systems across payers, providers and TPAs allow fraud to go undetected.
It suggests that automating document checks, anomaly scoring, ICD mapping and predictive fraud detection can reduce manual lapses, while tools such as remote patient monitoring, telehealth and shared ABDM/NHCX health records can prevent duplicate testing, unnecessary readmissions and fake claims through real-time verification.
Market Growth and Cycle of High Premiums
Health insurance remains the fastest-growing segment in the non-life insurance sector. The industry has expanded to `1.27 lakh crore as of 2025, recording an annualised growth rate of around 17% over the past five years. It is projected to grow 16–18% annually over the next five years to reach `2.6–3 lakh crore by 2030.
However, only about 13% of healthcare expenditure is currently met through insurance, while 48% is covered by government spending and 39% through out-of-pocket payments. The report says insurance’s share is expected to rise further, positioning it as a critical enabler of access and affordability, supported by the expansion of public and private coverage models.
The report warns that rising claims costs trigger higher premiums, reducing penetration and pushing more people toward out-of-pocket spending. This vicious cycle, it notes, ultimately results in delayed care, untreated conditions and declining public confidence in the system.