Public sector insurers to rationalise TPAs

11-Mar-2010

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 7080 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 5crore. 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.

Insurance companies blame TPAs for fraudulent claims in the health space, where the claim ratio is 130% BLOOMBERG 9March Ten-year bonds rose for the first time in three days, as yields at the highest in 17 months lured buyers. Yields have increased 10 basis points since Finance Minister Pranab Mukherjee announced Rs 4.57 lakh crore ($100.3 billion) will be raised from the market. The yield on the 6.35 per cent note due January 2020 fell four basis points to 7.96 per cent as of the 5:30 pm close in Mumbai, according to the central bank's trading system.

Rupee depreciates

* The rupee depreciated, after six days of gains, on speculation importers will purchase dollars to pay for shipments.The rupee weakened 0.2 per cent to 45.6350 a dollar as of the 5 pm close in Mumbai.

* Bonds advance as 17-month high yields attract investors.

Source : www.insuremagic.com