Competition watchdog probes PSU insurers

The companies are New India Insurance, Oriental Insurance, United Insurance and National Insurance

The Competition Commission of India (CCI) has initiated an investigation against public sector general insurers and their association, for alleged anti-competitive practices relating to third-party administrators (TPAs) in health insurance.

It recently ordered a probe by its director-general of investigation against New India Insurance, Oriental Insurance, United India Insurance and National Insurance, as well as their combine, the General Insurers’ (Public Sector) Association of India (Gipsa).

In its order, the competition watchdog had said these public general insurers are seemingly not allowing TPAs to function independently and have created in-house TPAs to settle any claims.

“The aforesaid conduct was against the prevailing worldwide practice to keep TPAs independent from insurance companies,” said CCI in its latest newsletter, referring to the order.

The four public sector general insurers created a company, The Health Insurance TPA of India, in August 2013 to handle their health insurance claims. The new company is being taken as an in-house TPA. However, it is yet to get a licence from the Insurance Regulatory and Development Authority and is not functional. The claims are currently being handled by external TPAs.

CCI in its newsletter said it was also alleged that Gipsa, an ad hoc and unregistered body, was providing a platform to the companies to share sensitive information with each other. This affects competition in the market and also provides space to them for exchanging information regarding claims ratios, marketing efforts and terms and condition of TPAs, among others.

The four companies were not available for official comment. However, senior executives said this issue had been raised earlier and the Union finance ministry had engaged with CCI on the matter.

"The in-house TPA is yet to begin operations and it would at least take one to two years to do so. Further, all TPA business will not be transferred to this new company and external TPAs will still be engaged," an official said.

The common TPA will process health claims. Subject to regulatory approvals, the health insurance TPA will also provide end-to-end ‘health services’. This would include member enrolment, call centre, customer service and grievance management, pre-authorisation and claims processing. Further, it would be involved in provider network empanelment, verification and investigation, pre-policy health check-up and in facilitating customer awareness and wellness programmes.

Health insurance loss ratios (between premiums collected and claims paid) range from 95 to 100 per cent. With stiff competition in the group health portfolio, and aggressive discounts given to retain customers, the losses have been on the rise.

An external TPA handling claims adds to the costs. Hence, public general insurers went in for a common TPA. However, till it is operationalised, losses are expected to continue.

The new company will provide services to support all types of health insurance policies sold by insurance companies in India. This includes individual, family floater, group covers, mass schemes, indemnity, fixed benefit among others. The common TPA has been proposed to prohibit large-scale leakages while settling insurance claims in the health segment.

Those in the sector said this common TPA was expected to speed up the claim-settlement process, as well as reduce the claims ratio of insurance companies. This move is expected to reduce costs for these insurance companies, which pay a commission of approximately six per cent of premiums to TPAs to settle claims.
BIG BROTHER WATCHING

• CCI has started probe against various public sector general insurers for alleged unfair business practices with regard to third-party administrators
• New India Assurance, Oriental Insurance, United Insurance and National Insurance, among others, have come under the scanner
• It has been alleged the four companies dealing in health insurance business were not allowing third-party administrators or TPAs to work independently
• CCI, which keeps a tab on unfair business practices across sectors, has recently ordered a probe by the Director General — its investigation arm
• Cases are referred to the DG for detailed probe only if the watchdog is prima facie of the opinion that there is violation of competition norms