India's health insurance sector is grappling with a significant challenge: fraud, waste, and abuse (FWA) that leads to an estimated loss of ₹8,000 to ₹10,000 crore annually. This systemic issue inflates premiums, erodes insurer margins, and strains public resources, ultimately impacting the accessibility and affordability of healthcare for citizens.
A recent report by Boston Consulting Group (BCG) and Medi Assist Healthcare, a third-party administrator, highlights the deeply embedded nature of these fraudulent practices across the health insurance value chain. The report, titled "Rebuilding Trust: Combating Fraud, Waste, and Abuse in India's Health Insurance Ecosystem," emphasizes that these issues are no longer isolated incidents but rather systemic and increasing.
The analysis reveals that FWA is geographically dispersed throughout India, affecting both urban and rural areas, and regions with varying provider densities. This widespread nature indicates that manipulation and misuse are not limited to specific hotspots but are prevalent across the country.
The consequences of FWA are far-reaching. As claim costs rise due to fraudulent activities and inefficiencies, insurers are compelled to increase premiums. This, in turn, reduces the penetration of health insurance, pushing more individuals towards out-of-pocket spending for healthcare needs. The result is often delayed care, untreated conditions, and a decline in public confidence in the health insurance system.
The BCG-Medi Assist report suggests a three-pillar framework to combat FWA: prevention, detection, and deterrence. This framework is built on standardization, technology, and data interoperability. The report emphasizes the potential of Artificial Intelligence (AI) and Generative AI (GenAI) in transforming claims processing from a reactive policing model to a proactive, real-time fraud prevention system.
According to Swayamjit Mishra, Managing Director and Partner at BCG, a significant portion of health insurance claims (approximately 90%) are risk-free, while about 2% are outright fraudulent and are typically flagged. The real opportunity lies in addressing the remaining 8% of claims, where inefficiencies and abuse can be tackled without inconveniencing genuine policyholders.
Several factors contribute to the persistence of FWA in the Indian health insurance system. Weak data systems, disconnected systems across payers, providers, and TPAs, and loose checks allow fraud to go undetected. Misrepresentation and document fabrication remain common fraud types across In-Patient Department (IPD) and Out-Patient Department (OPD) claims. Fraud risk tends to cluster in mid-ticket claims (₹50,000 - ₹2.5 lakh), where incentives are high, and oversight may be moderate.
To address these challenges, the report calls for tighter fraud prevention and detection mechanisms, unified medical-coding rules, AI-driven oversight, and faster data-sharing through initiatives like the Ayushman Bharat Digital Mission and the National Health Claim Exchange. Medi Assist is already leveraging technology by introducing AI-powered platforms like MAven Guard and MAgnum to enhance cashless healthcare processes and combat FWA.
Satish Gidugu, CEO of Medi Assist, believes that technology will play a crucial role in reducing fraud and rebuilding digital trust, making healthcare more accessible, affordable, and accountable for all citizens. He emphasizes the importance of forging digital trust and transparency into the health insurance infrastructure.
