Most of the insurance companies in India suffer losses and have been doing so for years together. The group insurance portfolio is what causes maximum leakage to the health insurance companies in India.
The process of health insurance claims is managed by third party administrators or better known as TPAs. So when a customer is admitted to a hospital all bills and claims are passed on to the TPA who then processes the claims on behalf of the insurance companies. This helps the insurance companies focus their energies and resources in their core business of insurance underwriting and business development. However it was found that the TPAs were contributing to large number of fraudulent claims being routed into the system in connivance with the hospitals. Also inflated bills were being made the hospitals in case the patient has a insurance. It was almost a case of differential treatment. The patient was not too concerned as the bill was being paid by the company anyway.
In the middle of 2010, the public sector companies, namely United India, New India, Oriental Insurance and National Insurance took a tough stand and blacklisted major hospitals where such practices were taking place. They removed these hospitals from the list from which cashless medical facilities could be availed by the customers. This caused a lot of pain to the insured, but the industry woke up to the fact that insurance companies were being taken for a ride.
The 4 public sector health insurance companies then decided to float a TPA of their own and do away with the middlemen who were not falling in line. This move is expected to cut down the frequency of fraudulent claims creeping their business. The move has received overwhelming support even from the private health insurance companies. The problem was not of the public sector health insurance companies alone and some private sector companies have done away with the practice of TPAs and used to process claims through in-house representatives.
The new TPA venture is expected to be finalized by the end of October 2010 and we should see enormous amount of relief to the customers. It is a step in the right direction and will the health insurance industry in India as a whole.