Third Party Administrators (TPAs) of insurance companies have been under fire for sometime. For several years, there has been significant number of complaints against them for, either delaying the process or rejecting claims.
Insurance Regulatory and Development Authority (IRDA) is not comfortable with this fact hence, in latest draft guidelines for standardization IRDA has said that TPAs should only process the claim to facilitate the insurer to take decision on claim settlement or claims rejection, as applicable. In other words only the insurer would have the right to settle or repudiate a claim.
Experts say that the main issue is that TPAs sometimes even question the treatment administered by the hospitals and the tests the insured is asked to undergo. Clearly, they can’t 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 the roll of TPAs.
In the PIL he said that while the roll of a TPA is only to process claims, in practice, the insurers offer incentives to them depending on the amount of claim reduced. 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 settles such claims without involving the insurer in this process.
However, IRDA in its draft guidelines has clearly mentioned that hereafter TPAs will have to convey the repudiation of a claim to the insured, only after they have been advised to do so by the insurer.
Defining the roll of a TPA IRDA said that while they can process, assess and evaluate a claim, they will not be allowed to go beyond that.
Currently, around 50% of 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.
However, TPAs defends their position by saying that they reject claims based on the policy features. They further add that claims are processed faster through them than insurers as they have required expertise and manpower.
But insurers feel that if these draft guidelines are imposed, the time taken to address claims would be reduced by at least 30-35%. This is because TPAs have been asked to process claims within two working days in the draft called for standardizing billing formats.
vinay mohanty
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