The four public sector general insurance companies — New India Assurance, National, United India and Oriental Insurance — have decided to work with only a handful of third-party administrators (TPAs) to manage claims in the health segment more efficiently.
TPA is an intermediary between hospitals and insurance companies and helps cashless claim settlement. Insurance companies blame TPAs for fraudulent claims in the health space, where the claim ratio is 130 per cent.
Senior executives of the four insurers said working with lesser number of TPAs would help insurers monitor their work better and work on reducing fraudulent claims. These four account for 60 per cent of the market share and 70-80 per cent of the business of TPAs.
“The intention behind rationalisation is to have better control over management of claims. The outgo in the health segment is high compared to the premium income, and the only way to be present in this segment will be increasing the premium rate, if not controlling TPAs. We have been working with 10 TPAs for some time and it has yielded good results,” said S Gopalakrishnan, general manager of New India Assurance.
“We are reviewing the performance of TPAs. We will work with those who deliver good results and get us better business. We will reallocate business after that,” said a senior executive of United Insurance Company. For one of the four insurers, the total inflow into health insurance was around Rs 1,400 crore while the outflow was around Rs 1,800 crore.
On the other hand, TPAs see this as a threat to the industry, especially the smaller players. A senior executive of Paramount TPA said, “If PSUs cannot accommodate the TPAs, it will be difficult for everyone to survive.”
Insurers say the regulator is also issuing any number of licences, and since the capital requirement is low, more and more players are getting into the business. TPAs expect the rationalisation process to lead to consolidation among smaller players. At present, there are 27 players in this space. Last year, the Insurance Regulatory & Development Authority had increased the minimum capital requirement for TPAs from Rs 1 crore to Rs 5 crore. At the time of the inception of TPAs in 2002-03, the government had suggested that an insurance company could appoint two TPAs per region. According to TPAs, the number of players was less at that time and the limit should be revised. In the last eight years, business volume has grown six times.
Public sector insurers are working on an in-house network of TPAs so that they can monitor the process better to bring down the high loss ratio in this segment. They have submitted a report to KPMG, which will come up with the final report within 16 months of receiving the mandate.
With increasing focus on bottomline, there is a shift towards inhouse health claims management and servicing. This is been a success with private players like ICICI Lombard (which has successfully moved to inhouse health claim management) and it would do good if the PSUs form a consortium and move the entire health claims to this body.
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