Continuing on our quest to simplify the workings of the Indian insurance industry, this article will go into the role of Third Party Administrators or TPAs. But before we do that, its best to reiterate how the insurance industry works… It goes something like this:

• You decide to get a health insurance policy.
• You choose the company that gives you the best option.
• That insurance company outsources your account to a Third Party Administrator or TPA so that your business can be handled efficiently.
• The TPA becomes your point of contact for all insurance related interactions.
• If you need your insurance claim, the TPA gets it organized.

What is a TPA?
For starters, the Third Party Administrator (TPA) is not a person. It is a company that acts on behalf of an insurance company to deliver the services of the insurance company to the insured. This mechanism enhances the quality and range of services as well as the geographical area that can be covered by an insurance company.

What was the necessity of introducing TPAs?
Outsourcing has been the buzzword for over a decade now. Businesses ranging from the Software Industry to the Medical fraternity have been outsourcing their tasks to agents, so that the mainstream specialists are free to do what they do best–specialize!

Outsource agents serve as very efficient secretaries. Their main work is to assist the larger entity in providing quality service. The outsource agencies started hiking up their service quality too, because now there was across–the–board competition among outsourcing agencies!

We now have professionals giving better service because their mechanical jobs are taken over by outsourcing companies. We also have excellent quality and infrastructure being given by the provider of the outsourcing service, lest the completion eat them up! Between the two professionals pulling themselves up, the winner is the consumer, who gets better service.

Let’s illustrate the concept with an example

• A doctor in the US dictates his diagnosis into a computer at 6.00 pm.
• This diagnosis is transmitted to a Medical Transcriptionist in another country, with a 12 hour time difference.
• The doctor goes home at 9.00pm.
• The Medical Transcriptionist wakes up in the morning in his time zone.
• He receives the doctor’s dictation at 9.00 am (local time) and begins transcribing.
• The medical transcriptionist finishes transcribing at 5.00p.m. and submits the assignment.
• The doctor reaches his office at 9.00 am (US time) and finds the transcribed diagnosis report ready for discussion.

That’s called round-the clock efficiency!
With the opening up of the insurance sector to private players, competition in India became fierce. Insurance companies started looking around for ways to add value to their services. Voila! The stage was set for the advent of the Third Party Administrator.

What are the criteria for becoming a TPA?
The regulatory agency for all TPAs is the Insurance Regulatory and Development Authority (IRDA). The IRDA grants and revokes licences to the TPA. It also lays down the guidelines and minimum criteria in terms of finance and infrastructure to be met before applying for a TPA licence. The detailed guidelines for TPA’s are provided at the site http://www.irdaindia.org/tpareg.htm. The salient points are

• A TPA must be a registered company, with at least one registered doctor on its board of directors.
• The TPA licence is valid for a period of 3 years from the date of issue and must be renewed after every three years.
• The IRDA reserves the right to cancel the licence if the TPA has been found guilty of deliberate malpractice.
• An insurance company can tie up with more than one TPA. Terms and conditions of the interaction between the TPA and the insurance company are to be drawn up internally between the two parties, without the interference of the IRDA.
• The TPA shall be remunerated directly by the insurance company for services provided. The buyer of the insurance policy cannot be charged for services rendered by a TPA.

Who are the TPAs currently licensed by the IRDA?
As on 16th June 2008, the IRDA has listed the following TPAs on the page www.irdaindia.org/tpalist.

With the organizational framework in place, we can now move on to the TPA’s functions. Third Party Administrators are your point of interaction with your insurance company and it is important that you have a clear view of how they operate. You can learn more about them in our article on TPAs: The Hows, Whys and Whats…