MUMBAI: A growing number of policyholders are finding themselves in the middle of an unsettling trend – major private insurers are suspending cashless claim facilities at leading hospital chains.
The most recent development involves Tata AIG General Insurance halting cashless services at Max Hospitals, making it the third insurer to do so, following Star Health and Niva Bupa. The issue, while specific on the surface, reflects a deeper, long-standing concern: the ambiguity and lack of transparency in India’s health insurance ecosystem.
At the heart of the problem lies a breakdown of trust between hospitals and insurers. According to Max Healthcare, Tata AIG had already signed a two-year tariff agreement starting January 2025. However, in July, the insurer demanded a further downward revision of those agreed tariffs.
When Max refused, cashless services were suspended from September 10. Similar disputes led Star Health and Niva Bupa to cut off cashless ties with all 22 Max hospitals nationwide. Care Health Insurance, too, has withdrawn cashless coverage at Max’s Delhi-NCR hospitals.
For patients and policyholders, this means confusion, distress, and sometimes a heavy financial burden. Health insurance in India is often sold on the premise of hassle-free cashless treatment. But as hospitals and insurers clash over pricing, the very promise of cashless convenience is being eroded – often without the policyholder being informed until the moment of hospitalization.
Regulatory intervention needed
This is where regulatory intervention could make a meaningful difference.
Despite the rapid expansion of the health insurance sector, there remains a lack of standardisation and enforceable guidelines around network agreements, pricing transparency, claims communication, and patient rights.
The Insurance Regulatory and Development Authority of India (IRDAI) has taken steps in recent years to improve disclosure norms and streamline claim processes. However, these cashless disputes show that existing mechanisms may no longer be sufficient.
One of the most urgent concerns is the absence of a structured dispute resolution mechanism between insurers and hospitals. Currently, when a contract breaks down, cashless arrangements can be terminated abruptly, leaving patients stranded. Hospitals, on the other hand, argue that they cannot absorb continued cost pressures without affecting service quality.
Mis-selling rampant
Another long-standing issue in the health insurance industry is mis-selling. Many customers buy policies based on assumptions, half-truths, or sales pitches that do not clearly explain exclusions, waiting periods, or network limitations.
In the event of a crisis – such as hospitalisation at a non-network hospital or a suspended partner – these gaps come to light, often with financial consequences for the patient.
At a systemic level, the regulator could consider several corrective measures: standard contracts between insurers and hospitals, mandatory notice periods before any service suspension, clearer communication protocols to inform policyholders of changes, and enhanced disclosure requirements during policy sales.
More robust regulation could also push for greater transparency in hospital billing, a source of concern for insurers who claim that arbitrary pricing makes cost control difficult.
From the consumer’s point of view, health insurance should provide protection, not uncertainty. The very concept of insurance rests on the principle of trust – that when medical emergencies occur, financial support will be available without friction or delay. With the current breakdowns in cashless networks, that trust is being tested.
As the health insurance sector continues to grow – both in terms of customers and premium volumes – the call for regulatory clarity becomes more urgent. For now, policyholders can only hope that insurers and hospitals resolve their differences quickly.
But for the future, it may take decisive action from the regulator to ensure that healthcare financing in India remains fair, transparent, and truly patient-first.
