TPAs’ case in Competition Commission against PSU Insurers may be weak

Third party administrators have moved the Competition Commission to block public sector insurers from floating their own TPA entity. Will the private TPAs’ move hold water?

Third party administrators (TPAs), intermediaries who handle insurance claims, have moved the Competition Commission of India (CCI) and the Insurance Regulatory and Development Authority of India (IRDA) to block a move by state-owned non-life insurers to float a captive company to manage claims.

However, the TPAs' case could considerably weaken given the plans of government-controlled insurance companies. Speaking with the media at a press conference of LICHFL Financial Services Ltd and United India Insurance, G Srinivasan, CMD, United India Insurance said, "We will not get rid of TPAs, only give partial business to a new common TPA entity." This stance taken by PSU insurers will surely weaken the TPAs' case.

Mr Srinivasan declined to give specifics on proportion of business distribution between common TPAs and existing TPAs. According to sources, "It is expected that 50%-75% of the health insurance premium of four PSU insurers would be transferred to the new (TPA) entity by its third year of operation and 75%-100% of their health insurance premium would be transferred to it by the fifth year. But all this is subject to its performance, especially in terms of reduction in claims." 

The CCI has set Wednesday (13rd October) as the date for the hearing of the petition submitted by TPAs.

Last week Mr Ramadoss, CMD, New India Assurance, told the media at a seminar that they have received 24 bidders to partner in their TPA venture. He added that GIPSA has not yet received any notice from CCI.

Meanwhile, IRDA is understood to have refused to entertain the complaints of the TPA Association, association sources said.

According to Sunil Sarnobat, co-founder and director of Medimanage insurance brokers, "All four public sector insurance companies coming together and deciding on a single TPA could be interpreted as cartelisation as these four government companies are separate legal entities. However, the TPAs cannot force an insurance company to use their services and insurance companies have been selecting TPAs for their various offices based on capability, fees charged, claims processing quality & technology implementation. We have examples of private insurers going in for in-house claims processing and hence you cannot stop insurers from setting up their own TPA. So it's not what is being done that is questioned. It's about who is doing it and the manner in which this is being done that makes it questionable."

Most of the TPAs are not eligible to bid because of the criteria that require the bidder or their parent to have a net worth of Rs250 crore.

TPAs fear that the captive company will put them out of business which will result in cartelisation, market dominance and monopolisation by state-owned companies who account for over 80% of the TPA business. The association has alleged that through the new TPA company, insurance companies would try to become a third party which would defeat the very purpose of consumer protection and neutrality which a third party has. Existing TPAs would have to stop their investments in business and IT and lay off the 10,000 people they have employed.

TPAs allege that if they shut shop, no insurer will be able to give policyholders a choice of TPAs as required by IRDA. Moreover, no new health company can come up as there wouldn't be any independent TPA to provide it with infrastructure support. The regulator has so far not permitted private insurers to take a stake in the TPA business. Given this stance, TPAs say the regulator cannot grant permission to public sector companies.

"The move will result in closure of all existing TPA companies. This will give rise to an arbitrary increase of premium, refusal of policies to the elderly, restrictions on cashless network, favouritism under the guise of preferred network of hospitals and corruption," TPAs have alleged in their letter to IRDA.

So who will blink first - the TPAs or the public sector insurers?



samar mahapatra

7 years ago

The genesis of TPA was the inability of PSU Insurers to get a credible contrivance to manage cashless access for the policy holders.This was addressed by IRDA, by a regulatory framework.The system could have been better nuanced and regulated.There is a clear case of turf war between hospitals and Insurers - TPA.
Simply running down private TPA , in favour of a new JV by PSU insurers is missing the tree for the woods.

Nagesh KiniFCA

7 years ago

The Competition Commission should be informed that the TPA's case is absolutely untenable as they have themselves an extremely tainted record of misfeasance and grave malpractices including connivance with certain favoured service providers by doctoring admission records, fudging claims, harassing small policy holders by outright rejecting claims or massive deductions. They do not have a professional set up, some are just operating as hole in the wall entities with no back to verify the reports and supports. They are a law unto themselves and earlier they are dispensed with the better. I know of a case when the TPA Medsave could not get a serious malaria affected senior policy holder to an insurance approved hospital at Dadar. He had to be shifted to KEM. Hospital. All particulars incl. KEM records and notes of talks with the TPA and doctor are avaiable.
The TPAs on the contrary indulging in cartelization. They were said to organise media campaign in July,August,Sept. 2010 maligning the hospitals with planted reports.
There is an urgent need for a pro bono intervention in the Competition Commission that the TPA application deserved to be thrown out as they have come with tainted hands and they lack transparency. Their intentions are patently mala fide. They deserve no sympathy. I don't know why New India paid them a whopping Rs.68 cr. in 2009-10 as per their RTI response to me.



In Reply to Nagesh KiniFCA 7 years ago

TPA service, conceptually, is for guided claims assistance to policy holders.Insurers primarily are liable for claims , delegating the TPA to act on their behalf.They are subject to policy terms and audit.It is a contrivance created by the IRDA..So, it is basically a regulatory deficit.CCI complaint is on a different platform and parameters.How does a oligopolistic TPA joint venture proposed by the PSU Insurers better than private TPAs, with the same flawed regulation?


7 years ago

The complaint by independent TPAs seems to be motivated only against public sector insurance companies as private sector insurance companies which have already set up their own TPA units have not been impleaded as respondents. The TPA unit by an insurance company is likely to bring improvement in efficiency due to absence of payment of commission to individual TPA and may be beneficial to the consumer as against settlement of the claims by individual TPA whose whereabouts may or may not be verifiable. At the same time, the proposed JV by public sector insurance companies places no restriction on the business of individual TPAs who will continue to operate independently as before.

India’s year-to-date M&A deal value reaches record high

New Delhi: The merger and acquisition (M&A) deal value in India has reached a record high of $44.2 billion so far this year and the outlook for the coming months looks bullish, reports PTI quoting a report.

According to a report by merger market, a M&A intelligence service provider, M&A activities in the country generally saw significant improvement in the past three quarters as 183 deals worth $44.2 billion were announced, up 24.5% in volume terms and 312.9% in deal value from a ago.

"We expect to see a lot more strategic activity in India as private equity players shy away from the sky-high valuations being demanded by shareholders," merger market Asia Pacific deputy editor Anjali Naik said.

Going forward, Ms Naik said the consumer, travel and hospitality sector may see a large number of M&A deals and India may trade into newer territories in the coming months.

"We are also seeing India forge acquisitions in new countries - such as Sri Lanka, given the proximity and cultural ties, and Australia - given their high quality resources and tech-savvy market," Ms Naik added.

The Indian government's auction of third generation (3G) and broadband wireless access (BWA) spectrums worth $11.009 billion and $5.473 billion, respectively contributed significantly to the deal tally.

A sector wise analysis shows that the technology, media and telecoms sector accounted for 47.3% of the total M&A deal value till date, while, the energy, mining and utilities sector, was the second most-active sector, as it contributed 26.3% in deal value for the first three quarters of 2010, the report said.

Rothschild topped the financial advisors league table In the first three quarters of 2010, as it advised on M&A transactions with a total value of $27.4 billion, while, Ernst & Young topped the deal count financial advisers table by advising on 18 deals, the report said.

Some of the announced deals so far this year include the $10.7 million Bharti-Zain deal, Vedanta's 60% stake buy in Cairn India worth $9.1 million, the $3.7 million Abbott Laboratories-Piramal Healthcare deal, the report added.


Personal finance Tuesday

IDFC extends closing date for bonds issue by 4 days; HDFC Bank increases rates on fixed deposits by 50 basis points; Principal MF floats Principal Pnb Fixed Maturity Plan-91 Days-Series XXIV; Karur Vysya Bank to launch point of sale services;

IDFC extends closing date for bonds issue by 4 days

Infrastructure Development Finance Company Ltd (IDFC) has extended the closing date for its bond issue by four days to 22nd October. The issue, which opened on 30th September, was initially to close on 18th October.

In 2010, the government introduced a new Section 80CCF under the Income-Tax Act to provide for income tax deductions for subscription in long-term infrastructure bonds. These bonds offer an additional window of tax deduction of investments up to Rs20,000 for the financial year 2010-11. This deduction is over and above the Rs1 lakh deduction available under Sections 80C, 80CCC and 80CCD read with Section 80CCE. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly.

HDFC Bank increases rates on fixed deposits by 50 basis points

HDFC Bank has increased interest rates on fixed deposits by 50 basis points on different maturities. The Bank has taken this step a week after it raised its lending rates. Deposits having tenor of one year to one year and 15 days will now get 7% interest while those maturing in two-three years would get 7.25%. Deposits having maturity of 30-45 days will now give 4% interest as against 3.75% earlier. Interest rate on 91 days to less than six months will go up by 25 basis points at 5.5%.
The Bank has revised its lending as well as deposit rates owing to the policy rate hike by the Reserve Bank of India in the second quarter review of monetary policy in September.

Principal MF floats Principal Pnb Fixed Maturity Plan-91 Days-Series XXIV

Principal Mutual Fund has launched Principal Pnb Fixed Maturity Plan-91 Days- Series XXIV, a close-ended debt scheme. The investment objective of the Scheme is to build an income oriented portfolio and generate returns through investment in debt/money-market instruments and government securities. The Scheme has no intention to invest in securitised debt and foreign debt instruments.

The Scheme offers growth and dividend options. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The Scheme opens on 12th October and closes on 13th October. The exit load for the Scheme is nil. The minimum investment amount is Rs5,000. The minimum target amount is Rs35 crore.CRISIL Liquid Fund Index is the benchmark index for the Scheme. The Scheme will be managed by Shobit Gupta.

Karur Vysya Bank to launch point of sale services

Karur Vysya Bank (KVB) has signed a memorandum of understanding (MoU) with Corporation Bank to launch point of sale (PoS) services.

MRL Posnet is the service provider for implementation of the PoS services. The company will help KVB by way of entering agreements with merchants, placing the PoS machines at the merchant outlets, besides taking care of the settlement and reconciliation processes. Prizm Payment Services will provide the switching solution for the transactions.

KVB recently increased its benchmark prime lending rate (BPLR) and base rate by 50 basis points. The Bank's current lending rate is 14% as against 13.5%. Also, its base rate has increased to 9% from 8.5%.


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