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Insurance regulator IRDAI has imposed Rs 5 lakh penalty on Reliance General Insurance Company Ltd for not making direct payments on health insurance claims to policyholders and routing them though third party administrators (TPAs).
IRDAI said it is in violation of norms on standardisation of health insurance.
IRDAI norms provide for payment to network providers and settlement of claims of policyholders by making direct payments to them and integrating their banking platform with the network provider or the insured.
Also, the insurer is mandated to make the reimbursements by cheque or demand draft if the insured wants so.
"...It is evident that the amount against the claims to be paid to the network providers/policyholders is still routed through the TPAs. The insurer can directly transfer funds through electronic means to the network providers or policyholders... This is a clear violation of the referred regulation. Thus, the Authority... Imposes a penalty of Rs 5 lakh on the insurer," Insurance Regulatory and Development Authority of India (IRDAI) said, in an order.
It said the intent or the purpose of following the practice of routing claim amount through TPAs has not been made clear by the insurer.
According to regulatory norms, a TPA is not allowed to settle claims on behalf of the insurer.
The guidelines are also framed to ensure and discontinue the system of maintaining a float or corpus fund with a TPA for any purpose.
