What Every Policyholder Should Know About Claim Calculations

“Behind every complaint is a person — often someone dealing with illness, loss, or distress.” 

— Mr Ajay Seth (IRDAI Chairman)

In November 2025, the Insurance Regulatory and Development Authority of India

(IRDAI) publicly expressed concern over a growing gap in health insurance claims. While insurers were settling a large number of claims, the amount actually paid to policyholders was, in many cases, significantly lower than what had been claimed.

Speaking at the Bima Lokpal Day event, the IRDAI chairman also noted that 53,230 complaints were received in FY24; 54% of the Complaint about Insurance company reaching the Insurance Ombudsman were related to health insurance.

That raises an important question.

If your insurer approves your claim but the amount credited to your account is lower than your hospital bill, how is that figure actually calculated?

Many policyholders assume that once a claim is approved, the insurer simply reimburses the entire hospital invoice. In reality, claim calculations are governed by the terms of your policy, the nature of the treatment and the admissibility of individual expenses.

Understanding how these calculations work can help you avoid confusion, ask the right questions and identify genuine insurance claim-related issues if they arise.

1. A Hospital Bill Is a Starting Point—Not the Final Calculation

One of the biggest misconceptions about insurance is that your hospital bill automatically becomes your claim amount.

It doesn't.

Think of your bill as a detailed record of expenses. Before approving a claim settlement, the insurer reviews every component against your policy.

This includes:

• Room rent and accommodation charges
• Doctor's consultation and surgeon's fees
• Diagnostic tests
• Medicines
• ICU charges
• Medical consumables
• Non-medical expenses, wherever applicable

Each item is assessed individually. Some expenses may be fully payable. Some may only be partially payable. Others may fall outside the scope of your policy altogether. Furthermore, different policies might have different clauses when dealing with these numbers, especially when it comes to package-capped procedures in network hospitals.

This is why two patients admitted for similar procedures may receive different settlement amounts.

The difference often lies not in the illness—but in the policy.

• Did You Know?

A claim that is partially paid is still counted as a settled claim. This is one reason why experts recommend looking beyond claim settlement ratios alone and understanding how insurers calculate the actual amount paid. 

2. Small Clauses Can Make a Big Difference

Policyholders often expect large deductions to result from major exclusions.

In practice, many deductions come from smaller clauses that receive very little attention when a policy is purchased.

These may include:

• Room rent eligibility
• Co-payment requirements
• Deductibles
• Policy sub-limits
• Exclusions for certain consumables or administrative charges

Individually, these deductions may appear modest. Together, they can significantly reduce the final amount received.

This doesn't necessarily indicate an error in the claim settlement. It simply highlights why understanding policy conditions before making a claim is so important.

3. When the Numbers Don't Make Sense

Not every reduced payout is incorrect. But every reduced payout should be understandable. As a policyholder, you have every right to ask your insurer:

• Which expenses were approved?
• Which expenses were deducted?
• Under which policy clause were the deductions made?
• Was any limit or exclusion applied unreasonably?
• Can you justify this number in detail?

A transparent explanation helps build trust. A vague explanation often creates unnecessary claim rejection-related issues, confusion and repeated follow-ups.

Transparency matters just as much as mathematics.

4. What the Law Says

There is a common misconception that questioning a settlement amount means accusing the insurer of wrongdoing.

It doesn't. Seeking clarification is a normal part of the claims process.

The IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 place considerable emphasis on fair treatment of policyholders, transparent communication and proper grievance redressal. Where a policyholder is dissatisfied with the handling of a claim, insurers are expected to provide reasons for their decisions and maintain an effective grievance mechanism. 

A review may be worthwhile if:

• The deductions don't appear to match your policy terms.
• You receive inconsistent explanations from different representatives.
• Similar expenses have been treated differently without any explanation.
• You're repeatedly facing insurance claim-related issues despite providing all required documents.

Sometimes, the explanation resolves the confusion immediately. Sometimes, it reveals that the matter deserves closer examination.

Knowing the difference can save both time and unnecessary stress.

5. From the SMEs Archive 

Subject matter experts at Bima Seva Kendra who regularly review insurance disputes notice an interesting pattern.

Very few policyholders ask how claim calculations work before they buy a policy. Almost everyone asks after receiving a lower-than-expected settlement.

By then, the discussion is no longer about understanding the policy—it's about interpreting it. And Insurance calculations involve policy wording, exclusions, admissible expenses and regulatory procedures that can be difficult for the average policyholder to interpret.

That's where experienced professionals become invaluable. An independent review can help determine:

• Whether the deductions are consistent with the policy wording.
• Whether all admissible expenses have been considered.
• Whether there are grounds to seek clarification or pursue further grievance redressal.

For many policyholders, expert guidance replaces uncertainty with clarity.

Organisations like Bima Seva Kendra play an important role in this process. Rather than encouraging unnecessary disputes, the focus is on helping policyholders understand how their claim settlement has been calculated, whether deductions are justified and what options are available if something appears inconsistent.

Equally reassuring is BSK's transparent approach. There are no upfront professional charges for taking up a case. Only after the case is approved is a one-time registration fee payable. There are no hidden costs, allowing policyholders to seek experienced guidance without worrying about additional financial pressure during an already stressful time.

Conclusion

Receiving a claim settlement is only one part of the process. Understanding why a particular amount was approved is equally important. A transparent calculation allows policyholders to make informed decisions, identify genuine concerns and move forward with confidence.

If something doesn't add up, ask for an explanation. And if the explanation still leaves questions unanswered?

 Help is but a click away.

---