Wednesday, November 23, 2011

Limits to outsourcing in health insurance

Third Party Administrators (TPAs) are the preferred means of claims settlement for health insurers across the world. In simple terms, the insurers outsource the claims settlement activity to these TPAs so as to save costs as well as time and help insurers focus on their core business.

So it comes as a big surprise that many insurers in India are cancelling TPA contracts due to customer dis-satisfaction due to health cards not reaching in time, and delays in pre-authorization, cashless issuance and processing of payment claims. A Businessline report says,

"Insurance companies also say that the claims can also be settled faster if done in-house. The claims settlement time has gone down by 50-70 per cent (depending on case to case) for ICICI Lombard since it shifted the process in-house in 2008... For Future Generali, customer complaints have gone done by 80 per cent after they moved to in-house claim settlement models in November 2010...

In-house claims settlement is faster as there is no loop in between the customer and the insurer. The industry benchmark is about 6-8 hours to approve a cashless request, whereas the approval from... in-house claims settlement team takes only 40 minutes due to... image-based process."

Is this another example of how transaction costs associated with outsourcing exceeds the efficiency benefits of specialized treatment screening and claims processing? See earlier posts here, here, and here.

1 comment:

Criselda said...

Thanks for the article, very informative