GENERAL INSURERS MAY CUT SHARE OF TPA BUSINESS

With big names in the insurance industry buying equity interest in third party administrators (TPAs), general insurance companies are planning to withdraw their business from them. This could blow a Rs 500-700 crore hole in revenues of TPAs like Paramount, Family Health Plan and Medi Assist say experts. A third party administrator works on behalf of an insurance company to manage claims and customers. Sources said United India and National Insurance have sent out circulars to these TPAs informing them of their decision. Others like New India Assurance, Oriental Insurance and private players like ICICI Lombard and Iffco Tokio are also expected to follow suit. At present, TPAs earn over 75% of their business from the public sector companies, with the balance coming from private players. These TPAs are being viewed as competitors in health insurance space since their parent firms have active interests in same space, says a source close to the development. When contacted APV Reddy, CEO, Family Health Plan, declined to comment. These developments follow consolidation in the health insurance business. Last year, for instance, the Anil Ambani group acquired a major stake in Bangalore-based Medi Assist India to make it a captive TPA for its own health insurance business. Similarly, the Apollo group, which owns Family Health Plan is tying up with a Munich Re company DKV to set up a standalone health insurance company. Additionally, Munich Re owns a 26% stake in Paramount and the remaining 74% is likely to be sold to an Apollo group nominee. However, there may be an exception for Bangalore-based TTK Healthcare, now a part of Swiss Re. Says Girish Rao, managing director, TTK Healthcare, "We have been talking to the chairmen and heads of the insurance companies clarifying that neither TTK nor Swiss Re have any intentions to get into health insurance directly. Globally too, Swiss Re is a reinsurance company and has no direct health insurance business." While this is bad news for these three TPAs, it means more business for the remaining 23 TPAs in the country.

Source: Times of India, April 8, 2007