41% surge in health insurance complaints raises concerns over service quality, investor risk in sector

A sharp rise in health insurance complaints and growing concerns over claim failures could have implications not just for policyholders but also for investors tracking India’s fast-growing insurance sector, according to a recent study by 1 Finance Magazine that analysed customer feedback across major insurers.

The report found that complaints in the general and health insurance segment rose 41% year-on-year in FY25 to 1,37,361, compared with 97,503 in FY24. More importantly, nearly 69% of all complaints were related to claims, highlighting operational risks in the segment at a time when insurance companies are seeing strong premium growth and rising valuations.

For investors, the data signals that headline metrics such as premium growth, market share and claim settlement ratios may not fully capture the underlying quality of an insurer’s business. The study notes that the commonly used claim settlement ratio does not reflect delays, disputes, or the financial stress faced by customers during hospitalisation, factors that can affect brand trust and long-term customer retention.

To assess real customer experience, the research analysed nearly 36,000 reviews across 23 insurers from platforms such as X, Google Play Store and Apple App Store. Each insurer was evaluated using a sentiment score based on customer emotion, service reliability and financial impact, giving a broader picture of operational performance.

Among the insurers studied in detail, the difference in scores was significant. ICICI Lombard received a sentiment score of 98, followed by HDFC Ergo at 96 and Bajaj Allianz at 93, while Manipal Cigna scored 69 and Care Health scored 50. Such a wide gap among widely sold policies suggests that customer experience risk can vary sharply even within the organised insurance market.

From an investor’s perspective, persistent complaints around claim approvals, customer support and reimbursement delays could eventually translate into higher regulatory scrutiny, rising servicing costs and slower policy renewals. In a sector where long-term profitability depends heavily on renewal ratios and customer lifetime value, weak service quality can become a material business risk.

The report also flagged that poor claim experience often forces customers to borrow money, postpone treatment or pay large amounts out of pocket, which can damage brand perception and reduce future sales through agents, banks and online platforms. Over time, this can affect growth visibility for insurers despite strong industry demand.

Manju Dhake, Head — Insurance Advisory Practice at 1 Finance, said: “Health insurance plays a crucial role in providing financial protection during medical emergencies. While coverage has expanded significantly in recent years, the claims experience continues to be one of the most important factors influencing customer confidence. Our research indicates that timely approvals, transparent communication, and consistent claim settlement practices can significantly improve policyholder experience. As the sector continues to evolve, strengthening these aspects will be key to building long-term trust with customers.”

India’s health insurance market is expected to expand rapidly due to rising healthcare costs, increasing awareness and wider coverage, making the sector attractive for investors. However, the findings suggest that operational execution, claim efficiency and customer trust could become key differentiators between companies.

For investors evaluating listed insurers or insurance-linked financial groups, the report highlights the need to look beyond premium growth and focus on service quality indicators, grievance trends and claim handling efficiency, as these factors may play a critical role in determining long-term valuations in the insurance sector.