Policyholders could soon have the freedom to select their own third-party administrators (TPA) for servicing claims on their insurance policies.

The Insurance Regulatory and Development Authority of India in an exposure draft to amend the TPA regulations has proposed the change and has sought comments from industry stakeholders by the end of July.

“In order to enhance the competition among TPAs and let the policyholders have an option of choosing TPA, it is considered to allow

the policyholders to choose the TPA of their choice from among the TPAs engaged by the insurer. Towards this, suitable regulatory provisions are proposed,” the IRDA said in a statement.

There are 26 registered TPAs who are engaged primarily in the business of servicing claims under health insurance policies by authorising cashless treatment and settling claims.

TPAs also carry out pre-insurance medical examinations in connection with underwriting of health insurance policies.

An insurance company can engage one or more TPA for providing health services to its policyholders and claimants.

“The insurer explicitly shall provide the list of the TPAs engaged, from among whom the policyholder may choose the TPA of his or her choice, at the time of proposal or the renewal as the case may be,” the IRDA said in the draft regulations.

Insurance industry observers said the move would encourage TPAs to improve their business as the policyholder will have the option to replace them at the time of purchase or renewal of policies.

“This will primarily benefit the policyholders of public sector insurance companies who engage several TPAs to maintain health insurance policies and service their claims,” said a city-based TPA executive, adding that there is difference in the infrastructure and efficiency of the TPAs.

The regulator has also incorporated a provision in the code of conduct to ensure that the TPAs are not canvassing business of health services directly from the policyholders.

IRDA has also replaced the concept of working capital of TPAs with minimum net worth requirement. Earlier TPAs were required to maintain a working capital of Rs 1 crore. The proposed amendment has kept the minimum net worth limit at the same level.

The regulator has also proposed increase in registration and renewal application fees for the TPAs.