Mental Health Insurance in India: Why Claims Remain Low Despite Rising Coverage

In India, health insurers are now required by regulation to offer mental health coverage on par with physical ailments. This mandate stems from the Mental Healthcare Act, 2017 and the subsequent IRDAI directive in 2018, which made it compulsory for all health insurance providers to include mental health in their policies.

However, while the coverage exists on paper, the actual utilisation remains strikingly low. According to recent data from Marsh McLennan, mental health accounts for less than 1% of all health insurance claims in India—a figure that points to a significant gap between policy and practice.

The Knowledge Gap: Awareness Is Still a Major Barrier

A key reason behind the underutilisation of mental health insurance is lack of awareness. The Marsh McLennan report found that 42% of individuals are unaware that their policy includes mental health benefits.

Furthermore, 83% of employers observed minimal utilisation of mental health-related claims, suggesting that even when coverage is available, it is not being effectively communicated or accessed.

This disconnect highlights a critical shortfall in educating policyholders about what their insurance actually covers.

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Outpatient Services: The Missing Piece in Most Policies

One of the main limitations of current health insurance plans is the exclusion of outpatient (OPD) services. Mental health treatment, by its nature, is largely outpatient-focused—therapy sessions, psychiatric consultations, and counselling rarely require hospitalisation.

Yet, most insurance policies only kick in when the treatment involves hospital admission.

While some policies do cover serious mental health conditions like schizophrenia, bipolar disorder, and severe depression when hospitalised, day-to-day therapeutic interventions remain outside the scope of many plans.

Stigma and Network Limitations Add to the Problem

Beyond coverage limitations, social stigma continues to be a major barrier. The report indicates that 48% of employees fear discrimination if they disclose mental health concerns, while 21% struggle to find in-network mental health providers.

This not only discourages people from seeking help but also prevents them from using the benefits they are entitled to.

Additionally, insurers often exclude coverage for treatments related to substance abuse, self-harm, or pre-existing conditions—further narrowing the window for effective mental health support.

Waiting Periods and Exclusions Lead to Policy Confusion

As with physical health issues, mental health conditions often come with waiting periods—especially if pre-existing. This can create confusion and frustration when individuals try to make claims, only to find their condition isn’t covered immediately.

Moreover, many policies still include vague or unclear language about what constitutes a claimable mental health expense, which adds to the overall uncertainty.

Claims Process Mirrors Physical Health—but Cashless Support Is Limited

The administrative process for making mental health claims is similar to that for physical health—requiring prescriptions, diagnostic reports, and hospital bills.

However, there are fewer cashless options for mental health treatment, particularly in outpatient settings, leading to more rejections and out-of-pocket expenses.

Conclusion: The Need for Inclusive, Accessible Policies

India’s mental health insurance landscape is evolving, but slowly. The Marsh McLennan report urges insurers to create better-designed products that cater specifically to mental health needs.

This includes:

• Expanding OPD coverage to include therapy and counselling sessions

• Building robust provider networks with mental health professionals

• Including rehabilitation and de-addiction centres in approved networks

• Eliminating exclusions related to self-inflicted injuries or substance abuse

Improving awareness and simplifying policy language will also be key to ensuring that more people feel empowered to seek help—and make use of the mental health benefits they’re already entitled to.

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