IRDA needs to repeal the loophole it left in health insurance guidelines
The insured need to know the reasons for claims denial or partial settlement as well as the remedies for grievances. Will IRDA take away TPAs' powere to recommend claim amount  or wait for Bombay HC to decide? 
On 16 December 2014, hearing a PIL filed by social activist Gaurang Damani, the Bombay High Court (HC) had directed the General Insurance Company/TPA to inform the policyholder for the reasons behind rejecting the claim or partially disallowing the claim under section 12(d)(ii) of the Insurance Regulatory and Development Authority (IRDA) Health Insurance Regulations, 2013 and also the remedies available to the policyholder. It is unfortunate that despite health insurance guidelines requiring that the policyholders know about reasons for denial or partial claims settlement, Bombay HC had to reinforce the same.
Mediclaim policy documents should specify the grievance option beyond the insurance company handling. It should specify the ways to approach IRDA's IGMS (Integrated Grievance Management System) along with the insurance ombudsman's  office contact details. Many policyholders are unaware of the insurance ombudsman option and there is need to educate them about the kind of cases that are handled and the timeframe for getting a hearing. The best part is that the insurance ombudsman's decision is binding on the insurance company while the insured can still pursue the matter with consumer or civil courts.
IRDA’s health insurance guidelines implemented in February 2013 state, “a TPA may handle claims admissions and recommend to the insurer for the payment of the claim settlement, provided a detailed guideline is prescribed by the insurer to the TPA for claims assessments and admissions.” It means a TPA will have a say in the amount that is to be paid for a claim or even recommend claim rejection to the insurance company. 
So, even though the insurance company will technically settle or reject the claim, the TPA will have a major role to play in the process. This will surely be exploited to its maximum by insurance companies and TPAs to meet their own needs. The regulator seems to have made a last minute change related to a TPA’s function that was absent in the previous versions of the draft. Has it created a loophole to give TPAs a role due to pressure from insurance companies?
Moneylife has found examples of TPAs making not just recommendations to the insurance company, but also sending claim rejection letters to the insured. It means that there is a need for the IRDA to ensure that there is compliance with guidelines. The prayer in the additional affidavit filed by Mr Damani states, “It is the petitioner’s humble prayer that clause 12(b)(i) of the gazetted regulations be immediately rectified in the spirit of the discussions held in the high court and also in reference to the documents submitted by Respondent No. 2 (IRDA) itself, to the high court. The words of the aforesaid clause ‘recommend to the Insurer for the payment of claim settlement’ should be removed at the earliest in the interest of justice, equity and fair-play.”
Economic Times article dated 25 December 2014 quotes New India Assurance general manager and whole-time director K Sanath Kumar, saying, "There is a downward trend in grievances in my company due to our increasing dependence on TPA (third party administrator) for settlement of claims and drastic reduction in communication gap with the policyholders."  It seems to be a direct admission of senior government insurance company official about TPA settling claims and not just recommending to the insurer claims payment. Read -
According to Mr Damani, “Sastry committee report of 2009 specified that TPA can only process claims. IRDA has classified TPA's as Intermediatories under section 42D of the Insurance Act, which does not specify about their role in settlement of claims. Health Services Regulations, 2001, sec 21 Code of conduct of the TPA's, also makes no mention of TPA's being allowed to settle or recommend claims. They can only process claim documents.”
In the third part of the article series we will look at possible reasons for decrease in claims ratio in 2012-13.
Read - 


Bangalore Stock Exchange to shut down after SEBI 'exit' order

The Bangalore Stock Exchange becomes the seventh stock exchange to exit operations under the SEBI policy dealing with defunct or sick exchanges


Securities and Exchange Board of India today passed exit orders, enabling the winding up of the Bangalore Stock Exchange (BgSE). 
“In terms of clause 2.2 of the Exit Circular, 2012, a stock exchange, where the annual trading turnover on its platform is less than 1,000 crore, can apply to SEBI for voluntary surrender of recognition and exit, at any time before the expiry of two years from the date of issuance of the said circular,” the order quoted.
The BgSE reportedly earned a mere Rs5.45 crore in income last financial year. 
Following an Annual General Body Meeting on 21 September 2013, the BgSE made a request to SEBI to exit as a stock exchange. SEBI through its order approved the exit while listing down the guidelines and conditions to be adhered to in terms of the exit process.
“Further, the Income Tax Authorities, Ministry of Corporate Affairs and the State Government of Karnataka are being intimated about the exit of BgSE, for appropriate action at their end,” SEBI said in a release.
The BgSE was set up in 1957 and gained permanent recognition to operate as an exchange in 1983. However, like many other exchanges including the Interconnected Exchange, the BgSE had little activity for long periods. 
The complete withdrawal of trading on most stock exchanges came with the National Stock Exchange cornering most of their market share and going on to become the largest by volume in many asset segments. Finally, with online trading and software from various brokerages freely available, local stock exchanges have become redundant and most trades pass through the two major exchanges.


Get ready for massive government borrowings

Due to poor recent experiences with the private sector, the government is pushing for much higher public investment, especially in infrastructure – at the cost of fiscal prudence


In the Mid-Year Economic Analysis (MYEA) for 2014-15, the Indian government has called a major policy change -- more public investment, especially in infrastructure segment. Tucked away on page 18 and 21, it says, "To revive growth, public investment may have to play a greater role … Consideration should be given to pursuing counter-structural fiscal policy as a way of reviving growth, and to finding the fiscal space to finance such investment…"

However, the question, especially looking at past experience, is whether public investment will necessarily lead to efficient outcomes. In addition, what will be the implication on fiscal deficit and interest rates?  This concern is on the backburner for now.

The government is turning impatient about poor growth and wants to take the reins of investment-led growth in its hands. According to the Mid-Year Review, the case in India for public investment going forward is threefold. "First, there may well be projects like roads, public irrigation, and basic connectivity, that the private sector might be hesitant to embrace. Second, the lesson from the Public Private Partnership experience is that given India's weak institutions there are serious costs to requiring the private sector taking on project implementation risks: delays in land acquisition and environmental clearances, and variability of input supplies, all of which have led to stalled projects.


These are more effectively handled by the public sector. Third, the pressing constraint on manufacturing is infrastructure. Power supply and connectivity are key inputs that determine the competitiveness of manufacturing."

How will this ambitious intervention be financed? The report notes "India has a fiscal flow problem but not a stock problem because the ratio of Government debt to GDP has declined substantially over the last decade due to a combination of high growth and high inflation," the report said. The report also notes, “that the debt dynamics will continue to work in India's favour as long as growth remains around 6% and the primary deficit remains in the current range of 1% of GDP. A case not just for counter-cyclical but counter-structural fiscal policy, motivated by reviving medium-term investment and growth, may need to be actively considered.”

This means the government thinks it has a lot of room to borrow. In overall terms, what the government in effect in the report is saying that, India desperately needs investment in infrastructure. The government will step in to boost it and it does not care much about slippage in fiscal deficit target in the process.

The push by public sector comes in the wake of disappointment of the last few years following “over-exuberant investment, especially in the infrastructure and in the form of PPPs”. There are stalled projects to the tune of Rs18 lakh crore (or about 13% of GDP) of which an estimated 60% are in infrastructure. In turn, this reflects low and declining corporate profitability as more than one-third firms have an interest coverage ratio of less than one, as borrowing is used to cover interest payments. Over-indebtedness in the corporate sector with median debt-equity ratios at 70% is amongst the highest in the world. The ripples from the corporate sector have extended to the banking sector where restructured assets are estimated at about 11-12% of total assets. Displaying risk aversion, the banking sector is increasingly unable and unwilling to lend to the real sector, it added.

Laying the ground for public expenditure to get out of this quagmire, the report argues that attracting new private investment, especially in infrastructure, in this climate, will be tough. "The PPP model has been less than successful. The key underlying problem of allocating the burden from the past, the stock problem that afflicts corporate and banks' balance sheets needs to be resolved sooner rather than later. The uncertainty and appetite for repeating this experience is open to question," the report said.

The other reason to argue for public expenditure is that while “private corporate investment surged in the boom phase, public investment too grew by about 3 percentage points. In addition, just as corporate investment declined by 8 percentage points during 2007-08 to 2013-14, so too has public investment by about 1.5 percentage points.”

If the thought process contained in the report is implemented, the bottomline would be this- The government and various public sector arms will enter the debt market to borrow massively. This demand for money will keep actual interest rates high, even if the Reserve Bank of India (RBI) cuts interest rates. Even that would be acceptable but what about the quality and deadline of public projects? The report notes, "To be sure, a greater role for the public sector will risk foregoing the efficiency gains from private sector participation. A balance may need to be struck with targeted public investments, carefully identified and closely monitored, by public institutions with a modicum of proven capacity for efficiency, and confined to sectors with the greatest positive spill-overs for the rest of the economy. These may then be able to crowd in greater private investment".  

Given how poorly supervised public investments are, this is a pipedream. All we may get out of this adventure is fiscal slippage.



K M Rao

3 years ago

PPPs have miserably failed on account of various reasons. The infrastructure companies have completely lost the trust of investors. The best course according to me is that the Govt. should give tax free bonds say at 10% and borrow from the market. The public will be more than willing to invest in these bonds rather than the IPOs and Mutual funds. Remember in 1990s Konkan Railway issued tax free bonds and the scheme was fairly successful. Professionals shall be brought in for execution of all important projects not the generalists.

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