Third-party administrators (TPAs) of insurance companies have been under fire for some time. For several years, there has been significant number of complaints against them for, either delaying the process or rejecting claims – a fact J Hari Narayan, chairman of Insurance and Development Regulatory Authority (Irda), is not at all comfortable with.
The latest draft guidelines for standardisation reflect this angst. “The TPA shall only process the claim to facilitate the insurer to take decision on claim settlement or claims rejection, as applicable. Only the insurer shall have the right to settle or repudiate a claim,” said the Irda draft.
The main issue, as highlighted by Arvind Laddha, chief executive of Vantage insurance brokers, is that TPAs sometimes even question the treatment administered by the hospital and the tests the insured is asked to undergo. Clearly, they cannot be allowed to interfere so much. In fact, Gaurang Damani filed a public interest litigation (PIL) in Bombay High Court last year against TPAs where he sought clarification on their role. “While the role of a TPA is only to process claims, in practice, the insurers offer incentives to them depending on the amount of claim reduced,” he says. A TPA may also decline or dispute a claim, over the treatment being taken by the insured.
Insurers give the authority of settling (accepting/rejecting) a claim to the TPA, usually where the claim value is low and the case doesn’t involve too much assessment. The TPAs settle such claims without involving the insurer in this process. However, the regulator in its draft, has clearly mentioned that henceforth TPAs will convey the repudiation of a claim to the insured, only after they have been advised to do so by the insurer.
“Defining and clarifying a TPA’s role was long overdue. While they can process, assess and evaluate a claim, they will not be allowed to go beyond that,” adds J Hari Narayan. He further says that maybe this is one reason why many private insurers opted out of TPAs and bought the service in-house.
Currently, around 50 per cent of the the private general insurance industry’s claims are settled by TPAs. New insurers usually outsource the claim settlement process through TPAs because settling claims in-house requires expertise and manpower, which the company doesn’t have in its initial years.
More From This Section
TPAs have thrived in these circumstances. An official working with a Mumbai-based TPA defends their position by saying they reject claims based on the policy features. “However, claims are processed faster through us than the insurers, because we have the required expertise and manpower,” he adds.
But insurers feel that if these guidelines are imposed, the time taken to address claims would be reduced by at least 30-35 per cent. Reason: TPAs have been asked to process claims within two working days and the draft called for standardising billing formats. This will help mapping of hospital information systems to specific data requirements of the insurance companies for faster claim processing and enhanced analysis of data.
All this sounds good on paper. But, one has to really follow the wait and watch policy here.