SMALL PLAYERS DIVERSIFY INTO INSURANCE SERVICES BUSINESS

Mumbai: After the rush of Indian conglomerates and foreign insurers in all segments of the underwriting business, domestic companies, which service these firms in the life and non-life categories, are charting growth strategies in new areas.

A host of family-run companies that were earlier confined to a segment of the insurance services business, are now venturing into other areas. For instance, the Apollo group, promoted by the Reddys, has ventured into the broking segment by acquiring E-Meditek.
Similarly, Bhaichand Amulok group, which has an insurance and reinsurance broking company called Bhaichand Amoluk Consultancy Services, has acquired a 26 per cent stake in another broking firm Willis BA.

Willis BA, one of the largest players in brokerage market, holds shares in a TPA called Health India. A TPA is a specialised health service provider rendering a variety of services, like arranging for hospitalisation and processing and settling claims. On the other hand, an insurance broker's job is to get the best cover with the lowest premium for its corporate clients. There are 30 TPAs registered with Irda, which managed premiums of Rs 4,400 crore in 2007-08.

A host of other promoters, such as Delhi-based Vipul group, Alankit and Safeway, Heritage, are in the TPA segment as well as the broking business. There are many others, such as broking outfit India Insure Risk Management Services, which plan to have a presence in more than one segment of the insurance services market.

While the service providers are venturing into related fields, many in the insurance industry are complaining that regulations prohibit brokers from processing claims. Also, at the time of renewal of big ticket corporate policies, insurance brokers do not disclose the information that they have gathered from TPAs to insurance companies.

Experts said that there is a possible conflict of interest, too, as TPAs, with broking arms, may entertain borderline claims associated with the clients.
An official of the Insurance Regulatory & Development Authority, however, pointed out that while issuing licences, the regulator tries to ensure that there is no common promoter or director.

"If the two companies (the insurance broker and TPA) are within the same group, there should be different directors and different promoters for the two companies," the source said.

Source: Falaknaaz Syed
Business Standard