By Venkatachari Jagannathan

Chennai, Aug 15 (IANS) The General Insurers Public Sector Association (GIPSA), a group of four state-owned non-life insurers, will invite partners to pick a 26-percent stake in a proposed company for processing health insurance claims, says a top official.

The association has called for expression of interest from eligible companies to enter into a joint venture with the four insurers, said the association's chief executive officer A.K. Singhal.

"Our member companies will together hold 74-percent stake and the outside partner will be offered 26 percent. The sharing of equity holding among member companies is expected to be equal, but it may also vary depending on the situation," Singhal told IANS.

The four insurance companies are: National Insurance, New India Assurance, Oriental Insurance and United India Insurance. They intend to form a health insurance claims processing company, commonly called a third party administrator, or TPA.

According to Singhal, the four companies together hold 60-percent market share in the Rs.83-billion Indian health insurance market that is likely to log 25 percent growth over the next five years.

The proposed TPA will be needing an upfront capital of around Rs.2 billion.

Health insurance has not been a profitable segment for many non-life insurers in India, owing largely to a very high claims ratio -- the net incurred claims ratio was over 100 percent last fiscal, or claims were higher than premia paid.

With average service charge of five percent on the Rs.50 billion health insurance premium earned by the four companies payable to TPAs, Rs.2.5 billion business is what is at stake for the proposed joint venture expected to start operations by June 2011.

The last date for submission of completed expression of interest is Sep 3.

"There will be no de-stabilisation of business for the existing TPAs currently serving the four insurers. The transfer of business to the joint venture will be gradual and based on performance in terms of reduction in incurred claims ratio," Singhal said.

As per current thinking, between 50 and 75 percent of the health insurance premium of the four companies would be transferred to the captive TPA by the third year of operation and up to 100 percent by the fifth year.

The association wants applicants to have a minimum five-year experience in the health insurance industry, a portfolio of having handled 500,000 claims, a net worth of Rs.2.5 billion and to have earned earned profits for three out of the last five years.