In health insurance, most of the disputes between the insurer and insured arise at the time of settling claims. This is the key reason for health insurers to have outsourced the function to third party administrators (TPAs). Instead of setting up infrastructure for settlements, and hiring and training a team, it seemed more viable to give the responsibility to TPAs, who already had trained manpower.
However, with increasing competition and rising consumer expectations on the quality of service, insurers are realising the need to handle and settle claims on their own rather than depending on the third party administrators. "Our company prefers to work without TPAs for better control over claim settlement and customer service. Our premiums may be high, but we promise better customer service," says Analjit Singh, chairman, Max India. The company became the latest entrant in the health insurance space after the launch of the Max Bupa Health Insurance.
Future Generali is also planning to set up in-house teams to service its health policies. "It is important for us to recognise health as a major line of business and provide infrastructure to ensure quality service to our customers," says K.G. Krishnamoorthy Rao, MD and COO, Future Generali India. The company currently services its policies through 10 TPAs and plans to switch to its in-house team by the end of this year. Others, such as Bajaj Allianz General Insurance, ICICI Lombard and Star Health, have their own teams for claims settlement.
Insurance companies believe the TPAs have not been able to deliver on the increasingly high service standards demanded by policyholders. In some cases, doctors and hospitals have refused to work with TPAs over the issue of payment of consultancy fee to doctors. Some insurers also complain that the float funds provided to TPAs are diverted to other group ventures instead of being used to settle claims. Besides, insurers had hoped the TPAs would bring down treatment costs through hard negotiations with hospitals, but these expectations were not fulfilled. With portability in health insurance policies soon becoming a reality, insurers will prefer their own teams to interact directly with both customers and hospitals to ensure better service and faster redressal of problems.
While private insurers are setting up their own teams, four state-owned non-life insurers—National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company—are proposing a common TPA for settling health insurance claims. "The boards of United India and New India Assurance have approved the proposal, while the boards of the other two companies are yet to give the green signal. When this happens, the structure of the new company will be decided," says G. Srinivasan, chairman and MD, United India. These insurers are obviously not very happy with the performance of the TPAs, and before they came into the picture, the claims were processed in-house.
Does this signal the end of the TPA model? Not so soon, say experts. "The TPAs have a huge network and replacing them with in-house teams will take a lot of time. Also, the insurers who are still working with TPAs will wait and watch how the in-house model works before taking a decision," says the CEO of a standalone health insurance company.
Whichever model wins, the policyholders are hoping it will result in a smoother and faster settlement process.
Why the TPA model has failed
- As competition increases, insurers expect the quality of ser vice to be the key differentiator.
- Portability in health insurance policies will soon become a reality, so insurers prefer their own teams to interact with customers and hospitals.
- The differences between TPAs and hospitals over fees and claims has affected the settlement process.
- Some insurers are complaining that the float funds given to TPAs for settling claims are being used for other group ventures.
- The TPAs have not managed to bring down treatment costs by negotiating with hospitals.
