Case No. 49/2010. Case: Association of Third Party Administrators Vs General Insurers (Public Sector) Association of India. Competition Commision of India

Case NumberCase No. 49/2010
Party NameAssociation of Third Party Administrators Vs General Insurers (Public Sector) Association of India
JudgesR. Prasad and P.N. Parashar, Members
IssueCompetition Act, 2002 - Section 19
Judgement DateJuly 08, 2011
CourtCompetition Commision of India


  1. The present information has been filed on 03.09.2010 under Section 19 of the Competition Act, 2002 ('Act') by the Association of Third Party Administrators ('Informant') against General Insurers (Public Sector) Association of India ('Opposite Party').

  2. The brief facts of the case are as follows:

    2.1 The members of the Informant association are individually providing service to the insured by processing their insurance claims and providing cashless and non-cashless facility to the insured on behalf of the General Insurance Companies. The Opposite Party is a voluntary association of four public sector General Insurance companies viz., National Insurance Company Ltd, The new India Assurance Company Ltd., The Oriental Insurance Company Ltd., and United India Insurance Company Ltd.

    2.2 The informant has alleged that the Opposite Party brought out an invitation for Expression of Interest (EOI) for setting up a Joint Venture to make a Third Party Administrator (TPA) for providing health insurance claims management service jointly on behalf of its 4 constituent members. As per the Informant, through the EOI, the Opposite Party is proposing to enter into an anticompetitive agreement whichwould cause an appreciable adverse effect on competition within India and the members of Opposite Party have formed a cartel through their EOI.

    2.3 The Informant has also alleged that the main object of forming the joint venture by the Opposite Party is clearly manifested from the EOI that the members of the Opposite Party are looking to improve the profitability of their health portfolio.

    2.4 It has been further alleged that the proposed Joint Venture TPA would have absolute powers to arbitrarily reject the claims of the insured customers because claim reduction is an explicit criterion for the premium sharing between the Opposite Party and proposed TPA. It is also alleged that the proposed joint venture TPA would abuse its dominant position to dictate terms to the network hospitals so as not to service any other TPA or that the other TP As would not be offered the same prices by network hospitals as compared to proposed joint venture TPA because of their miniscule individual market share.

    2.5 The informant has also contended that the proposed agreement would result in creation of barriers for new TPA to enter the health service market, as more than 60-70% of the existing health insurance market would not be available to such new entrant TP As. The existing competitors would be driven out of the said 60-70% of the market and their market would be reduced from the existing 100% to a situation of about for 30-40%.

  3. The informant prayed for the following reliefs:

    3.1 To direct the institution of an enquiry into the violation of the provisions of Section 3 and Section 4 of the Act in the matter.

    3.2 To direct the Opposite Party not to enter into any anti competitive agreement pursuant to the EOI dated 14.08.2010 or any subsequent amendment thereto and declare void if any agreement has been entered into by it as null and void in pursuance to the EOI dated 14.08.2010 3.3 To direct the Opposite Party not to abuse its dominant position.

    3.4 To declare the Opposite Party, a cartel in terms of Section 2(c) of the Act.

    3.5 To impose such penalty as deemed fit.

    3.6 To award costs of the present proceedings.

  4. The informant has also sought interim relief under Section 33 of the Act and has prayed that the Opposite Party be restrained from taking any action pursuant to the EOI dated 14.08.2010 till the disposal of the present information.

  5. The Commission considered the matter in its meeting held on 28.09.2010, 13.10.2010, 26.10.2010, 03.11.2010, 23.11.2010/01.12.2010, and 19.05.2011. The Informant has also filed the additional details (brief summary and market dynamic analysis of TP As and health insurance market) dated 25.10.2010. The Informant has raised the following points in its additional submissions:

    5.1 The Opposite Party have a combined market share of 60% of the Indian Health Insurance market and with the setting up of one TPA will oust 27 TP As which are presently operating in the health insurance market.

    5.2 Any JV TPA entered into by the Opposite Party in furtherance of EOI invited by it would not only have appreciable adverse effect on competition but would also restrict the entries of new TP As in the market.

    5.3 The Opposite Party by abusing its dominant position is trying to bring down the high claim ratio through arbitrary reduction of claims.

    5.4 The proposed JV TPA agreement shall affect the independence of the TP As and the claims will not be processed on merit as the TPA itself will be having financial stake in the venture. The Opposite Party is attempting to control the market in an illegitimate manner which is the contravention of Section 3(3) of the Act.

    5.5 The efficiency and innovativeness of the TPA shall be affected because the consumer will have no option but to approach only one TPA irrespective of TPA's performance.

    5.6 The Opposite Party is indulging in collusive bidding which is contravention of Section 3(3)(d) of the Act.

    5.7 JV TPA would also lead to the situation where the Opposite Party constituents would refuse to deal with the existing TP As which is a violation of Section 3(4)(d) of the Act.

  6. The Commission has also sought comments of IRDA but no response has been filed till date. The Commission has carefully scrutinized the information, the documents annexed, the additional details filed and the oral submissions advanced by the Informant.

  7. It is noted that health insurance is an important mechanism to finance the health care needs of the people. To manage problems arising out of increasing health care costs, the health insurance industry had assumed a new dimension of professionalism after the introduction of TP As.TP As were introduced by IRDA in the year 2001. The core function of a TPA is to ensure better service delivery to policyholders. The notification of IRDA dated 17.09.2001 defines TPA as:

    TPA" means a Third Party Administrator who, for the time being, is licensed by the Authority, and is engaged, for a fee or remuneration, by whatever name called as may be specified in the agreement with an insurance company, for the provision of health services;

  8. Thus, it is seen that the basic role of TPA is to function as an intermediary between the insurer and the insured to facilitate cash less service at the time of hospitalization or claim settlement.

  9. It is also noted that the IRDA has issued regulations {The IRDA (Third Party Administrators - Health Services) Regulations, 2001} for governing the TP As business. As per the above regulation, a company with a share capital and registered under the Companies Act, 1956 can function as a TPA. The main or primary object of the company should be to carry out business in India as a TPA in the health services, and on being licensed by the IRDA, the company shall not engage itself in any other business. The regulations further prescribed that more than one TPA may be engaged by an insurance company and, similarly, a...

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