In a significant ruling that reinforces the limited role of Third-Party Administrators (TPAs), the District Consumer Disputes Redressal Commission in Ranga Reddy, Hyderabad, has held an insurance company and its TPA guilty of service deficiency. The commission found them at fault for unlawfully deducting a substantial portion of a mediclaim reimbursement.
TPA Oversteps Its Mandate, Deducts Claim Illegally
The case was initiated by a 19-year-old student who underwent surgery in October 2023 at a private hospital in Uppal, Hyderabad, for the removal of an implant from his left leg. The medical expenses totalled ₹61,735, which he sought to claim under his father's family floater mediclaim policy.
However, the family received a settlement letter from the TPA approving only ₹42,200. A sum of ₹19,535 was deducted without a clear explanation from the insurance company itself. The complainant argued that the TPA had acted beyond its legal authority by making this decision, a violation of the guidelines set by the Insurance Regulatory and Development Authority of India (IRDAI).
Commission Reiterates: TPAs Are Merely Facilitators
After examining the evidence and arguments from both sides, the consumer commission delivered a clear verdict. The panel emphasized that, as per IRDAI regulations, a TPA functions solely as a facilitator for processing claims. It has no independent power to decide on the admissibility or rejection of a claim.
The commission observed that the deduction was communicated exclusively by the TPA without any authorisation or direct communication from the insurer. This action was deemed unsustainable in law and constituted a clear deficiency in service.
Refund, Interest, and Compensation Ordered
The redressal body issued specific directives to rectify the wrong. It ordered the insurance company and the TPA, jointly and severally, to refund the deducted amount of ₹19,535 to the complainant. This refund must carry an interest of 9% per annum from the date of the deduction until the full amount is realised.
Furthermore, recognising the mental agony and inconvenience caused, the commission awarded ₹10,000 as compensation to the student. An additional ₹5,000 was granted for litigation costs. The commission also issued a stern warning to the TPA against indulging in such unfair trade practices in the future and directed it to strictly adhere to IRDAI guidelines. Non-compliance with the order within 45 days would attract additional compensation.
This ruling serves as a crucial reminder to insurance providers and their administrators about the boundaries of their roles and the paramount importance of following regulatory protocols in claim settlements.
