The four state-owned general insurers that are setting up a common health insurance claims settling company (in-house third party administrator or TPA) plan to rope in a local or a foreign partner for the TPA.

M Ramadoss, chairman and managing director of New India Assurance, told Financial Chronicle, “The partner, whether domestic or foreign, will be allowed to own 26 per cent stake in the common TPA company. We are yet to finalise the structure of the company, the infrastructure and other modalities. We hope to float the request for proposal for inducting the partner next month and finalise all other plans by August 2011.”

On the capital for the TPA, Ramadoss said, “We are still in the discussion phase. But, each of the four insurance companies would invest about Rs 50 crore and the company would have a capital of around Rs 250-300 crore.”

A TPA is an intermediary between an insurer, a hospital and a policyholder and assists in claims settlement.

According to sources close to the development, “There are several international players that are doing third party administrator work for global insurance companies which are being considered such as Wellpoint and Genpact. Similarly, some large local TPAs in which private insurers do not have vested interests are also being considered for induction as a partner.”

Wellpoint is a leading health benefits company serving 33 million policyholders and Genpact is a global leader in business process and technology management. Both are listed on the New York Stock Exchange.

G Srinivasan, chairman and managing director of United India Insurance, said, “Our board has already cleared the proposal to have a common TPA but it has to be cleared by the boards of the other insurers after which we will float the request for proposal, followed by finalisation of other modalities and approvals from the finance ministry and the insurance regulator. Our objective is to reach finality in a year around July 2011.”

“Since the public sector insurers own a large chunk of the health insurance market, the common TPA will be assured of business,” said the source.

A year ago, the four government companies -- New India Assurance, Oriental Insurance, United India Insurance and National Insurance -- had appointed KPMG as a consultant to set up a common TPA. Their goal was to cut costs, reduce the spiralling claims ratio from 130 per cent and protect their customers’ data from TPAs that were owned by private insurers and large hospital chains.

At present, private insurers such as ICICI Lombard, Bajaj Allianz, Star Health & Allied Insurance and ICICI Prudential Life Insurance settle claims in-house. Similarly, Max Bupa Health Insurance & Allied Insurance and Future Generali also have plans to set up in-house claims settlement divisions.