The Competition Commission of India (CCI) has taken a U-turn by ordering a probe against the General Insurers' (Public Sector) Association (GIPSA) and the public sector general insurers for alleged anti-competitive practices, industry experts have said.
In 2011, on an issue raised by the Association of Third Party Administrators against the GIPSA, the CCI said there was no prima facie case calling for an investigation by its director general and closed the matter.
The CCI's recent probe decision assumes significance as the public sector insurers have floated a common health insurance claims processing joint venture - the Health Insurance TPA of India Ltd.
"In 2011, the public sector insurers have not floated any TPA (third party administrator). But now there is the common TPA and has been licensed by the IRDA (Insurance Regulatory and Development Authority) as per the company's website," K.K. Srinivasan, former member IRDA, told IANS.
When the issue was raised before the CCI in 2010, the GIPSA, an association of the four government owned non-life insurers - New India Assurance, Oriental Insurance, United India Insurance and National Insurance - had only called for an Expression of Interest (EOI) for a joint venture partner for setting up a common TPA.
The CCI then ruled that the insurers are consumers of TPA and the position of the policyholder does not change. The proposed TPA would not affect the competition between the insurers.
If the joint venture TPA proves to be inefficient then the policy holders would switch over to other insurers, the CCI held in 2011 and hence there was no need for further investigation.
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However, the dissenting decision held that the public sector insures holding a dominant share in the health insurance market and if the proposed TPA is allowed into the market then there will be no competition in the TPA market.
The proposed joint venture TPA would have the largest market share and it is very much likely it would abuse its market position. The dissent note directed the director general to carry out the probe.
With CCI recently ordering a probe reversing its earlier stand, the issue is interestingly poised.
The fair trade regulator now said the move of the public sector insurers was against the prevailing world wide practice to keep claims processing agency independent from the insurance companies.
"The government insurers now command around 62-65 percent of the total health insurance business estimated at around Rs.18,000 crore," Nayan Shah, managing director of Paramount Health Insurance TPA, told IANS.
He said the average service fee for TPA will be around four percent of around Rs.14,000 crore of health insurance business serviced by them as many private companies process the claims in-house.
Based on these calculations, the overall TPA industry size is around Rs.560 crore out of which the share of government companies is around Rs.450 crore and hence the existing TPAs are a worried lot.
Following the CCI probe decision, officials of the government companies say that the services of other TPAs will be used and not entirely dispensed with.
However, there are not many takers for that view as even the Health Insurance TPA is silent on the matter.
Citing a tender document issued by the government insurers, Shah said they have said the captive TPA would serve their entire needs over a period of time, forcing many others going out of business.
"I do not buy the argument that the four PSUs will not be using the common TPA exclusively or substantially but will also be using the private TPAs. If that be the case what is the need for the PSU TPA? I think that argument is put out to try and avoid CCI net," Srinivasan said.
The Health Insurance TPA told potential bidders for the integrated software solution that the successful bidder would be told whether it would service only the government insurers or would also look at other insurers.
If Health Insurance TPA decides to look for business from other insurers then the issue of leveraging its market dominance would crop up before the CCI.