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IRDA moots 100% FDI for 3rd party administrators

BS Economy Bureau

The Insurance Regulatory and Development Authority has proposed 100 per cent foreign direct investment for third party administrators in health insurance, while prescribing a minimum equity of Rs 10 million in its draft guidelines released on Monday.

TPAs, which are outsourcing outfits used by insurance companies for various backroom activities including design of products, has proposed to permit them to service more than one insurer at a time.

Unlike the guidelines on insurance companies where IRDA put a cap of 26 per cent, sources said IRDA could permit up to 100 per cent FDI for TPAs.

"The regulator is looking forward to comments from the industry ministry which is the nodal ministry for allowing FDI in any sector," a source said.

The draft proposal has restricted sale of insurance policies by the TPAs. Besides this, the insurance regulator has proposed a code of conduct for the outsourcing agencies with strict norms on information sharing, advertising and publicity.

IRDA has also asked the TPAs to refrain from motivating customers to shift their "insurance portfolio to another insurer with whom the TPA has comparative favourable terms in the agreement".

TPAs have only been permitted in the health insurance business as IRDA and the government are of the opinion that there is a need to popularise the health business in India. According to estimates only 2 million Indians possess health insurance covers.

IRDA has said that only those people who have undergone a course in health management from an institution recognised by the regulator and who have cleared the licentiate examination conducted by Bombay-based Insurance Institute of India will be eligible to apply for a TPA licence.

Also, a practical training in health management of over 3 months are eligible. Health insurance TPAs will also need access to competent medical persons to seek advise on various issues that may come up during the course of business.

As per the draft code of conduct, a TPA will be required to identify itself and the insurance company with which it has entered into an agreement, disclose the licence number and any details asked for by a customer as also the details of the services it is authorised to render.

Applications seeking licences have to filed within 60 days of conclusion of a contract between a TPA and an insurer. Unlike the licences for insurance companies, a TPA registration will be valid for three years.

IRDA has also said that it can call for an explanation from a TPA in case it thinks that the agency is not effective or is not carrying out its duties as envisaged.

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