Companies diversify into TPA, insurance broking

Experts say that the insurance regulations prohibit brokers to process claims but with a sister company in the TPA business, brokers are overcoming the regulations. Their second concern is that at the time of renewals of big ticket policies, insurance brokers do not disclose the information that they have gathered from the TPA to the insurance companies.

Third party administrator is a specialized health service provider rendering a variety of services like arranging for hospitalization and settling a  policyholder's claims.

The TPA benefits the policyholder by providing faster hospitalisation while insurance companies are benefited by a reduction in their administrative costs, ruling out fraudulent claims and ultimately bringing down the claim ratios. On the other hand, an insurance broker's job is to get the best cover with the lowest premium for his corporate client.

Take for instance---Bhaichand Amulok Group which owns an insurance and reinsurance broking company called Bhaichand Amoluk consultancy services, also owns 26 per cent stake in Willis BA (insurance broking company) and thirdly owns a TPA called Health India.

Similarly, there are groups which have Vipul Insurance Brokers in addition to a TPA company called Vipul Med Corp TPA, Alankit Insurance Services and Alankit Health Care Ltd, Safeway Insurance Brokers besides Safeway Mediclaim Services (TPA), Heritage Insurance Services and Heritage Health Services (TPA), KM Dastoor Insurance Brokers besides a TPA arm called Dedicated Healthcare Services. According to sources, India Insure Risk Management Services too has plans to foray into TPA business.

On the same lines, Apollo Group that owns a TPA company called Family Health Plan is also into insurance broking by acquiring E-Meditek, United Healthcare that initially owned a TPA later became a partner in an insurance broking company called Metis Insurance Brokers.

Says an insurance expert, "If TPAs have insurance broking arms, they may entertain borderline claims associated with the clients of the insurance broking company. Secondly, the insurance broker will push products of only those insurance companies to its customer with which its TPA arm has a tie-up."

Agrees another expert, "The emerging synergies and consolidation of services by TPAs and insurance brokers could result in a nexus which can lead to bottom-lines of health insurance companies getting negatively impacted
The emerging development does not provide a level-playing field for the standalone TPAs."

Says an official of IRDA, "While giving license, we see that there is no common promoter and no common director. If the two companies (insurance broking and TPA) are within the same group, then there should be different directors and different promoters for the two companies."

Points the expert, "People are circumventing the law by keeping different directors. IRDA should see that the shareholders are not the same which it is overlooking at present."

There are 30 TPAs registered with the IRDA, managing premiums of Rs 4400 crore in 2007-08.