Shares of Star Health and Allied Insurance Company took a significant hit on Tuesday, March 25, 2025, as they plummeted to a 52-week low following a report from the Insurance Regulatory and Development Authority of India (IRDAI) that revealed serious lapses in the company's claims settlement practices. According to sources, the IRDAI has found substantial deficiencies that may lead to regulatory actions against the insurer once its ongoing investigations are concluded.
On this day, Star Health’s stock fell by 3.83% to close at ₹347.25 on the Bombay Stock Exchange (BSE). This decline came amid a broader context in which the 30-share Sensex remained flat at 78,017.19 points. The fall marked another in a series of setbacks, as the stock had already shed 4.27% in the two sessions preceding this news.
The IRDAI’s inspections have scrutinized various aspects of Star Health’s claims handling, including the numbers of claims that were rejected versus those approved, queries raised by policyholders during the settlement process, and deductions made. Importantly, Star Health's incurred claim ratio stood at 66.47% for the fiscal year 2023-2024, which means that for every ₹100 in premiums collected, the company paid out approximately ₹67 in claims. While this figure is slightly above the overall incurred claim ratio of stand-alone health insurers, which was 63.63%, it pales in comparison to the industry average of 82.52%.
In the past financial year, Star Health rejected a staggering 296,356 claims, which adds to the mounting concerns of policyholder dissatisfaction and raised questions about its operating procedures. During the same period, Star Health also tallied a low claim settlement ratio of just 82.31% within the first three months of the claims being filed, the lowest among all stand-alone health insurers.
Aside from the scrutiny over its claims settlement practices, Star Health also faced financial challenges as it received tax demand orders from the GST and Central Excise authorities amounting to approximately ₹49 crore. The tax demands, issued on March 24, 2025, pertained to claims violations like non-payment of GST on coinsurance transactions, and they could impose further financial pressures on the company.
In response to the findings, Star Health reassured its stakeholders, stating, "We wish to reassure all our stakeholders that at Star Health Insurance, we are committed to a customer-centric approach, ensuring that our processes and practices align with the best interests of our policyholders."
The company continued, "IRDAI conducts regular audits and thematic inspections as part of its regulatory oversight, in line with the framework outlined in its master circulars. These assessments are a routine process to ensure compliance across the industry. The media statement appeared to be speculative and motivated in nature, and we have not received any communication on this subject from the regulator.” Star Health is clearly focused on maintaining customer trust and enhancing claims processes moving forward.
The backdrop to all this has been an earlier cyberattack that compromised sensitive data from over 31 million customers, with reports stating that this data was being sold online. Such incidents have compounded the company's struggles and added to regulatory scrutiny.
These ongoing developments signal potential long-term consequences for Star Health, as the pressure builds for it to restore operational integrity and customer confidence. The company’s current dilemma underscores the critical importance of transparent and efficient claims handling in the insurance sector, especially amid growing regulatory scrutiny.
As investigations continue, stakeholders will be watching closely to see how Star Health navigates this challenging environment and whether it can implement necessary changes to bolster its standing in the competitive insurance market.
