THE VHI board has started a wide ranging review of the company's operations.

Two subcommittees are to examine the organisation's structure and the company's strategy, as the VHI prepares for competition.

Among the issues for examination is the relationship between the board and the company management. This relates in part to some differences which have surfaced between the chairman, Mr Noel Hanlon and chief executive, Mr Brian Duncan.

The subcommittees are also examining the company strategy and its product mix, as the British company, BUPA, prepares to launch on to the Irish market.

As it prepares to face this competitive challenge, tensions have emerged in the company. Among the issues which have caused disagreement between the board and the management in recent months is the dispute with private hospitals. A charges structure has not been agreed for this year, meaning that VHI subscribers have had to make top up payments for treatment in 18 private hospitals.

There is also understood to be an ongoing disagreement between Mr Duncan and the board on the role of one senior company executive.

Following the departure of former chief executive, Mr Tom Ryan, in early 1994, a special committee was established, chaired by Mr David Kennedy, former Aer Lingus managing director, to advise on the organisation of the company. Following this, the board was enlarged earlier this year through the addition of seven new members. The committee also advised on the relationship between the chairman and chief executive.

However, many of these issues are now being re examined by the board subcommittee on organisation, while another subcommittee is focusing on strategy.

The examination comes as the VHI faces criticism for increasing charges. Among the issues being examined are its relationships with doctors and hospitals and the rapid increase in medical technology, which is pushing up the cost of treatment and premiums.

The company's financial position and the state of its reserves are also under review. In recent years, its finances have been supported by returns from investment, with its main insurance business reporting under writing losses.

In the past, the VHI has pointed out its readiness to face competition. It has a relatively low cost base by international standards and a comprehensive range of products on offer to its customers. Over the next couple of months the board is expected to consider the subcommittees' views on what the VHI now needs to do.

The VHI chief executive, Mr Brian Duncan, joined the company early last year. A few months earlier he had resigned from Irish Life.

The chairman, Mr Noel Hanlon, acted as chief executive for a period after Mr Ryan's departure. His current term as VHI chairman is up next February. Mr Hanlon is also chairman of Aer Rianta.