PSU general insurers to set up a common TPA to settle medical claims

MUMBAI: State-run general insurance companies are setting up a common third-party administrator to settle medical insurance claims, a move aimed at trimming their unwieldy claims ratio and boosting profitability.

The claims ratio, or percentage of claims to the premium earned, of these public sector companies in health insurance is over 120% and they blame third-party administrators (TPAs) for their spiraling losses in the segment.

“We have started the process of setting up the TPA (third-party administrator) along with LIC and GIC,” said G Srinivasan, chairman of state-run New India Assurance. “Health insurance claims have been going up every year and it is affecting our profitability .”

The partners in the in-house TPA are General Insurance Corp (GIC), Life Insurance Corp of India (LIC) and the four general insurers —New India Assurance, National India , United India and Oriental India Insurance. While GIC is a reinsurance company, LIC is the country’s largest life insurer.

The insurers believe that an inhouse TPA will help lower claims. According to Srinivasan, though there is a cost involved in setting up the TPA, it would be recovered over the years as claims drop.

Experts say policyholders can expect a correction in premium as the 5% commission paid to TPAs for settling claims would be passed on to them.

The new TPA could also result in market dominance by state-owned companies, which together account for over 80% of the TPA business, they said.

Earlier, the state-run insurers were mulling an in-house TPA with a foreign partner, but the plan was put on hold as they failed to identify a partner.

Private insurance companies such as ICICI Lombard, HDFC Ergo and Bajaj Allianz General Insurance already have in-house claim settlement processes.