Third-Party Administrator (TPA)
Insurance is one of the hottest sectors in India in terms of growth and sustainability. As this industry continues to expand, the demand for professionals like a third-party administrator (aka TPA) is soaring rapidly. TPAs are certified professionals who serve as an aid for health insurance firms seeking assistance in managing health insurance claims. Serving the role of TPA is subject to some legal implications, including securing an IRDAI’s approval in the form of a license. Here’s what you need to know about obtaining a license for a third-party administrator in the insurance sector.
Understanding the Roles of Third-Party Administrator (TPA)
A Third-Party Administrator (TPA) is essentially the IRDAI’s licensed professional who helps health insurance firms with operations concerning claim processing and settlement. Well-versed in claim norms and processing, TPAs can play an instrumental role in boosting the turnaround time for insurers, eventually increasing the customer satisfaction rate. TPAs provide such services against a fee agreed upon by the insurer. Acitvities handled by TPAs include:
- Processing claims for cashless hospitalizations
- Managing health policy administration
- Ensuring smooth claim processing.
- Assessing claims for hospitalization covered under personal accident policies and domestic travel policies.
- Conducting pre-insurance medical exams, which help insurers assess risk levels and determine premiums.
- Managing claims for travel and medical insurance policies issued by foreign insurers for travelers in India, ensuring seamless service for policyholders worldwide.
- Overseeing health service matters concerning foreign travel policies, including medical treatment or hospitalization outside India.
Why Get a License for Third-Party Administrator in the Insurance Sector?
With the demand for health insurance products thriving rapidly, insurance firms need certified professionals like TPAs who can expediatedly serve the insured without leaving any margin for error. Getting a license for a third-party administrator in the insurance sector ensures that the licensee operates within the legal framework and in the interest of the clients and the insurer.
Check out our stories: 7 Steps To Get Insurance Broker License in India
Requirements for a License for Third-Party Administrator in the Insurance Sector
Obtaining a license for a third-party administrator in the insurance sector requires an applicant firm to meet specific requirements, some of which are as follows:
1. Incorporation and Capital Requirements
- To qualify for a TPA license, a company must fall under the ambit of the Companies Act, 2013. This also signifies that individuals or sole proprietorships cannot apply for this registration.
- As per IRDAI, TPAs don’t stand eligible to serve any industry except health insurance in India. Any non-conformity in this respect shall be deemed as a breach of the license’s terms, leading to the cancellation of services.
- Companies seeking a TPA registration must hold ₹4 crore (the minimum paid-up equity share capital) and ₹1 crore (a minimum net worth).
2. Naming and Identity
- The company name must entail the words viz. “Insurance TPA”, explicitly reflecting its purpose as a third-party administrator in health services. This helps reinforce transparency among stakeholders and clients, ensuring level field play and fair practices.
3. Foreign Investment Compliance
Foreign investments in TPAs are not possible unless incoming funds adhere to IRDAI guidelines and GOI’s norms.
How to Apply for a License for Third-Party Administrator in the Insurance Sector?
Applying for a TPA license involves catering to underlying requirements in a step-wise manner. Here’s the breakdown of the entire process.
Step 1: Registration on the IRDAI BAP Portal
The first step involves registering on the IRDAI portal viz. BAP. This portal serves as a single window for application submission and communication with authority. Once registered, the portal shall redirect you to the section wherein you can submit the application.
Step 2: Submit Application and Processing Fee
Upon filling out the application, cross-check it for any compliance errors or inaccuracies. Once done, upload the mandatory documents and pay the non-refundable processing fee of ₹1,00,000 (plus taxes) on the payment gateway.
Step 3: Submit Additional Documentation
The IRDAI may prompt the applicant to share some additional documents if required. Strive to submit the required documents within the stipulated time to avoid processing hassle. These documents shall undergo thorough evaluation for compliance and accuracy.
Step 4: Pay the Registration Fee
Upon conditionally approving the application, you must pay a registration fee of ₹2,00,000 (plus applicable taxes). Once done, the authority shall grant the certificate of registration, certifying an entity to operate as a TPA.
License Fee Structure for a Third-Party Administrator in the Insurance Sector
The fee structure for a TPA license includes:
- Processing Fee: ₹1,00,000 (non-refundable)
- Registration Fee: ₹2,00,000 (valid for three years)
- Renewal Fee: ₹1,50,000 (once every three years)
Renewal Process for a License for Third-Party Administrators in the Insurance Sector
TPA registration stays valid for a period of 3 years, post which its timely renewal is paramount to ensure continuity and avert penalties. The renewal fee can be as high as ₹1,50,000.
FAQs Around TPA Registration
What exactly is a Third-Party Administrator (TPA) in insurance?
A Third-Party Administrator, or TPA, is a company that helps insurers manage health insurance claims and services. They handle tasks like claims processing, pre-insurance medical exams, and assisting with cashless hospitalizations.
Who can apply for a TPA license in the insurance sector?
Only a registered company with share capital under the Companies Act can apply. The company must focus exclusively on health services, and the name should include “Insurance TPA” to reflect its purpose.
How much capital do I need to start a TPA?
To apply, your company needs a minimum paid-up equity share capital of ₹4 crore, and your net worth must stay above ₹1 crore at all times during the license period.
What’s the process to get a TPA license from the IRDAI?
First, register on the IRDAI BAP Portal, submit your application and a ₹1,00,000 processing fee, provide any requested documents, and pay a registration fee of ₹2,00,000 once approved. If everything checks out, IRDAI issues a Certificate of Registration.
How long is the TPA license valid, and what’s the renewal process?
The license is valid for three years. To renew it, you’ll need to pay a renewal fee of ₹1,50,000 before it expires to keep your TPA business running smoothly.
Conclusion
A license for a third-party administrator in the insurance sector serves as a launchpad for individuals and entities seeking to reap unprecedented growth in the health insurance sector. Working as a TPA offers a perfect blend of opportunities and risks, making this domain worthwhile to consider. Some applicants may find it difficult to navigate the intricate labyrinth of a TPA license.
In that case, the support of a seasoned partner like Adviso can come in handy. Adviso shines with its robust network of professionals and steadfast support, helping clients at every step of the way in their business quest. With unmatched expertise and experience, Adviso makes compliance adherence a seamless affair no matter the industry or workload.
Also Read: Understanding IRDAI Corporate Agent Registration: A Comprehensive Guide
