Mr S.B. Mathur

Our Bureau

Hyderabad, July 17 The Third Party Administrators (TPAs) should be provided with adequate working capital, according to a panel set up by the Insurance Regulatory and Development Authority (IRDA) to evaluate the performance of TPAs.

The committee, in its report submitted to the regulator, observed that there was a need for some guidelines to protect the financial exposure of insurance companies and TPAs.

It recommended that the paid-up capital be enhanced to Rs 2 crore for a start-up TPA business.

The fresh infusion of capital will have to be effective in the financial year subsequent to the year in which the billings cross the thresholds specified. The existing organisation may be given time till March 31, 2010 to comply with the conditions, it said.

It had also recommended a schedule for fresh capital infusion in tune with the growth in billing/revenue of TPAs.

The panel, headed by Mr S.B. Mathur, Secretary-General, Life Insurance Council, suggested that TPAs below Rs 20 crore revenue/billing would require Rs 2 crore paid-up capital and those with over Rs 41 crore in revenue would require Rs 5 crore.

There should be specific investment guidelines for deployment of capital. "TPAs can invest only in TPA-related activities and in bank deposits for approved securities. Inter-corporate deposits are not permitted," it said.

Security

To ensure the financial security of the insurance companies or other stakeholders, a sum of Rs 1 crore should be kept as fixed deposit with IRDA.

Further, they may be required to purchase adequate insurance cover with an E&O policy of three times the fee earned in the last financial year with a minimum of Rs 1 crore and a floater fidelity guarantee for Rs 3 crore.

The funds for making payments for claims must be released within seven days of submission of the request by the TPAs with an appropriate mechanism for reporting delays, the report said.

Customer service

To ensure best practices, the committee suggested adopting common wording of MoUs with hospitals, standard list of documents to be enclosed with the claim form and standard billing formats.

'A standards-based consumer redressal system, where in all consumers have to approach only one standard level of care is planned,' the report said.

During the first half of 2008-09, the total premium grew 47 per cent and stood at Rs 3,350 crore.