Health Insurance and Mediclaim

In one line

Mediclaim is an indemnity: it pays what the treatment cost, up to the sum insured, and only if the illness is not one the policy has put outside the cover.

In the wording a student can write in an exam: health insurance business is defined by section 2(6C) of the Insurance Act, 1938 as the business of effecting contracts of insurance that provide sickness benefits or pay for medical and health expenses, and since 2026 it expressly includes personal accident and travel insurance business; a hospitalisation indemnity policy, commonly called mediclaim, reimburses the reasonable and customary expenses of medically necessary treatment as an inpatient, subject to the sum insured, the waiting periods, the sub limits and the exclusions the policy contains.

The statutory class

Section 2(6C), as substituted by Act 40 of 2025 with effect from 5 February 2026, defines health insurance business as the business of effecting contracts of insurance that provide sickness benefits or pay for medical and health expenses, and includes:

(i) the personal accident insurance business of effecting contracts providing for payment of money in the event of death, disablement or hospitalisation arising out of an accident; and

(ii) the travel insurance business of effecting contracts providing sickness benefits, paying medical and health expenses, providing for payment on death, disablement or hospitalisation arising out of an accident, or for losses suffered in the course of travel.

A specialised health insurer needs one hundred crore rupees of paid up equity capital under section 6(1)(ii), the same figure as a life or general insurer, which is why there are relatively few standalone health insurers in India.

And health cover is written by general insurers as well. Health business is not general insurance business under section 2(6B), which is fire, marine and miscellaneous; but a general insurer registered for miscellaneous business writes health, and most Indian health premium sits with general insurers.

The nature of the contract: an indemnity

Unlike a life or personal accident policy, mediclaim is a contract of indemnity. It pays what was spent, and the whole apparatus of indemnity follows.

The insured recovers his actual expense and no more, subject to the sum insured.

Contribution applies. A person with two health policies covering the same hospitalisation recovers once, and the insurers share. The Authority's regulations now let the insured choose which policy to claim under and require the insurers to settle between themselves.

Subrogation applies in principle, though most Indian health policies expressly waive it, so an insurer that pays a hospital bill after a road accident does not usually pursue the driver.

And there is a sum insured, which a benefit contract does not need in the same way, together with a cumulative bonus that increases it for each claim free year.