Star Health sees bigger AI role in settlement; says 25-30% of industry claims linked to fraud

Star Health and Allied Insurance is stepping up its use of artificial intelligence (AI) and digital tools to detect fraud, speed up claims processing and improve customer experience, Vishwajeet Mohnot, Executive Director, Star Health and Allied Insurance Company, told Fortune India.

The Chennai-based private insurer is leveraging the large volume of data generated across the health insurance ecosystem to improve product design, assess risks and identify suspicious claims early.

“Today, the way the health ecosystem is functioning, there is a lot of data. That data has to be intelligently used for two purposes - one is to build products and two is to underwrite quality risk,” Mohnot said.

AI tools to detect fraud

Fraud, waste and abuse remain a major challenge for insurance industry. Mohnot estimates that 25-30% of insurance claims across the industry are linked to fraud or abuse, making early detection critical.

“For us, the biggest pain point is the fraud and waste, all the waste and abuse. For that, we are using some intelligent tools of AI with some partners,” he said.

Star Health is also using technology to streamline claims by enabling digital data exchange between hospitals and the insurer. Its network hospitals are connected to the insurance system, allowing medical and claims-related information to be transferred digitally and approvals to be processed faster.

Mohnot said timely communication can improve the claims journey. If customers inform the insurer about a planned hospitalisation in advance, Star Health can guide them to an appropriate network hospital and support them through different stages of treatment.

AI-powered face scan for real-time health insights

The insurer has also developed a face-scan feature that can provide an instant reading of around 13 health parameters. Mohnot clarified that the tool is meant only to give customers an indication of their current health and is not used for underwriting or onboarding.

“This is just to make you aware of your own healthcare resources. We don't use this as an underwriting tool to onboard customers,” he said.

Star Health continues to use its existing underwriting parameters and health-related questions to assess customers.

70% of new business transacted digitally

Digital adoption is also gaining ground across its distribution network. More than 70% of the insurer’s new business is now transacted digitally, with agents using mobile applications to complete the onboarding process.

In its June quarter earnings report, Star Health said AI use cases are being deployed across the value chain, with a focus on measurable outcomes. Its claims operations have been strengthened with an AI-ML analytics layer to improve precision and efficiency, while Generative AI capabilities are being added to further enhance outcomes. The company is also strengthening its in-house AI capabilities through global technology partnerships.

For Q1 FY27, Star Health reported a 44% YoY rise in normalised profit after tax to ₹386 crore, driven by premium growth, disciplined underwriting and operating efficiencies. Underwriting profit jumped to ₹111 crore from ₹16 crore a year earlier.

Its proprietary digital direct-to-consumer (D2C) channel contributed 16% of fresh retail sales during the quarter, registering 142% YoY growth.

Over the next three to five years, Star Health plans to focus on technology, marketing and deeper penetration of tier-2, tier-3 and rural markets. Mohanat said awareness of health insurance is improving in smaller towns, although limited access to quality healthcare remains a challenge.

The insurer is using health camps, webinars and telemedicine services to improve access and build awareness, including among people who have not yet purchased health insurance.