Systemic leakages found in India’s health insurance sector, says BCG and Medi Assist

Medi Assist Healthcare Services Ltd. and Boston Consulting Group (BCG) unveiled a comprehensive framework to combat Fraud, Waste, and Abuse (FWA) in health insurance, an issue that currently causes annual leakages of about ₹8,000–10,000 crore across the ecosystem.

The report, titled "Rebuilding Trust: Combating Fraud, Waste, and Abuse in India’s Health Insurance Ecosystem," outlines how fraudulent behaviours, process inefficiencies, and policy violations have become deeply embedded across the entire value chain. Instead of isolated incidents, these practices are now systemic and increasing.

As India’s healthcare spending grows, the proportion financed through health insurance—currently about 13%—is expected to increase, making insurance a key factor in improving access and affordability. The expansion of both public and private coverage options will fuel this trend.

Measured by Gross Written Premium (GWP), the health insurance industry has grown to ₹1.27 lakh crore as of 2025, reflecting an annual growth rate of around 17% over the past 5 years. The next 5 years look promising, with the industry maintaining its growth momentum at about 16-18%, reaching roughly ₹2.6 - 3 lakh crore by 2030. Future market-shaping developments such as composite licenses and health Value Added Services will serve as strong enablers of this sustained growth, leading to increased coverage and redefined services offered by insurers.

“Bolstered by the vision of Insurance for All by 2047, India’s health insurance ecosystem is evolving rapidly. Today, digital innovation, expanded coverage, and public–private collaboration have laid a strong foundation for equitable access and sustained growth,” said Alpesh Shah, Lead - CEO Advisory APAC, Managing Director and Senior Partner at BCG.

Shah said systemic leakages caused by Fraud, Waste, and Abuse (FWA) are silently eroding trust and financial resilience in the insurance ecosystem. This report is a call to action for insurers, providers, and policymakers to shift from reactive oversight to proactive prevention.

“With the intelligent use of interoperability, connected care, and AI, we can embed trust, standardisation, and accountability to build an integrity-led health insurance ecosystem that fulfils the nation's ambitions and also sets a global benchmark,” added Shah.

FWA is not limited to high-density medical hubs. Fraud risk has become geographically dispersed across India, with no single hotspot. The report notes that both urban and rural areas, high and low provider-density regions, show consistent patterns of manipulation and misuse.

The impacts of FWA are cumulative and cascading. As claims costs rise, insurers raise premiums, which reduces penetration and pushes more people into out-of-pocket spending. This vicious cycle ultimately leads to delayed care, untreated conditions, and declining public confidence in the system.

“In India’s health insurance landscape, about 90% of claims are risk-free, while 2% are outright fraudulent and continue to be flagged today. The real opportunity lies in the remaining 8%, where inefficiencies and abuse can be addressed without inconveniencing genuine policyholders,” said Swayamjit Mishra, Managing Director and Partner, Core Member Financial Services and Technology Lead in Insurance, APAC, BCG.

Mishra said that harnessing digital intelligence, interoperable platforms, and next-generation technology, we can systematically target this segment to reduce fraud leakage, improve trust, and unlock significant value across the ecosystem. “These efforts can advance the government’s Insurance for All vision by nearly five years, strengthening India’s journey toward a transparent, technology-driven, and sustainable health insurance system” said Mishra.

While the problem is significant, the solution is within reach. The report highlights how advancements in Artificial Intelligence (AI) and Generative AI (GenAI) can transform claims processing from a post-facto policing model into a proactive, real-time fraud prevention system.

Key insights of the report:

• FWA is Systemic, Not Sporadic: The challenge is no longer isolated; it is deeply embedded across geographies, processes, and behaviours in both urban and rural contexts.

• Fragmented Ecosystem: Disconnected systems across payers, providers, and TPAs allow fraud to remain undetected.

• The report outlines a three-pillar strategy: Prevention, Detection, and Deterrence, and is anchored on the foundational layers of Standardisation, Technology & AI, and Data Symmetry & Interoperability

• AI-Powered Detection: Advanced models can proactively flag impersonation, code mismatches, document tampering, and overbilling in real time—transforming claims adjudication.

• The report proposes assigning Trust Scores based on treatment patterns, readmission rates, and documentation transparency to institutionalise accountability.

• Inconsistent coding enables overbilling and claims mismatches; a framework-based tariff is recommended to drive uniformity and fairness.

• Automation of document checks, anomaly scoring, ICD mapping, and predictive fraud detection reduces manual lapses and accelerates adjudication.

• Tools like remote patient monitoring, telehealth, and shared ABDM/NHCX health records can prevent duplicate testing, unnecessary readmissions, and fake claims through real-time verification.

To address this, the report outlines a three-pillar framework of Prevention, Detection, and Deterrence, underpinned by the enablers of standardisation, technology, and data interoperability.

Prevention shifts the focus from reaction to anticipation, leveraging connected care, predictive analytics, and wellness data to reduce unnecessary admissions and over-utilisation. Detection institutionalises operational excellence through automated validation, anomaly scoring, and exception-only human review enabled by shared digital rails. Deterrence, in turn, reinforces accountability via stronger legal guardrails and transparent Provider Trust and Member Health scores that influence routing, documentation, and pricing behaviour.