Just read an article in the latest issue of Outlook titled "The Vanishing Middle"- which went on to talk about how intermediaries are being threatened with shrinking margins and new technology.
It covered three basic sectors:
- DSAs in banking sector
- TPAs in General Insurance
- Travel Agents

With around 5000 people, TPAs are probably the smallest of the lot (the article puts the DSA number at 35,000 and travel agents at 150,000). But interestingly all these 5000 are employed by 23 odd TPAs who currently have the IRDA license.

The various arguments in favor of a possible demise of this category of players were:

- TPAs , inspite of the huge volumes of claims that they handle have not been able to negotiate a better rate for the insured. Which for the Insurance company means higher claims than premium

- Once the volumes build up, most companies would want to look at doing the TPA part of the business in-house. This is what Vishakha Mulye was quoted. This is what Bajaj Allianz had done way back in 2004 and this is what New India Assurance tried doing last year - with mixed response.

- Delays in claim settlements, which in turn impact the insurance company's brand value

- Inconsistent or inaccurate data capture by TPA- which can lead to serious pricing errors. It is the TPA collected data that is used for product development and pricing- if this data is inaccurate or unreliable, the complete business model can go for a toss.

- Data security issues will also rise given that TPAs typically deal with multiple insurers.