Insurance Third Party Administration Market Worth USD 737.03 Billion By 2030 | CAGR 6.48%

Introduction

Third-party administrators (TPAs) are used by businesses to manage their claims. Many cater to medium- to large-sized companies that have decided to self-insure a portion of their liability, commercial property, or workers' compensation risks. They are also responsible for handling claims for businesses that have self-funded their health, dental, and other benefit plans. TPAs generally range in size from small to medium. Third-party administrators are commonly referred to as TPAs, but they are also referred to as "administrative services only" occasionally (ASO).

As it expands into new geographies, value chain segments, client types, and product lines, the TPA industry must align its services and operating models with shifting demand patterns. As a result, they must stay current with other sectors.

Market Dynamics

Burgeoning Technology and Higher Healthcare Cost to Propel the Market

TPAs have adopted several technologies to stay in line with market trends. The risen adoption of advanced technologies such as IoT, artificial intelligence, machine learning, and robotics process automation has resulted in the expansion of the insurance third-party administrator industry. TPAs also use these technologies to ensure efficient processes that provide excellent service while lowering costs. Corvel Corporation, for example, has introduced CogencyIQ, artificial intelligence and predictive analytics tool designed to address complex claims.

Furthermore, by consistently investing in and updating their technology, TPAs embrace customer trends and accommodate new technologies at a lower cost to update their administrative platform. Again, technological innovation in the insurance industry has been evolving rapidly in recent years, and the pace of these advancements is expected to accelerate in the future with the introduction of increased process automation, automated underwriting, and higher levels of customer interaction.

To stay competitive, digital TPAs provide a technologically advanced ecosystem in a timely and cost-effective manner to assist insurers in effectively handling claims. As a result, these are the primary motivators in the market for third-party insurance administrators.

Furthermore, rising healthcare costs are expected to increase the demand for third-party administrators. The cost of healthcare has risen dramatically in recent years and is expected to increase even further as chronic disease prevalence increases. TPAs have proven to be a valuable asset to self-insured programs by lowering costs without sacrificing employee healthcare quality. As a result, TPAs have piqued the interest of investors. In recent years, major health insurers United, Anthem, and Centene have made significant TPA acquisitions.

Surging Adoption of Third-Party Administrators in the Health Insurance Industry

A third-party administrator is required to process healthcare claims. In the practical world of insurance, a few responsibilities of a TPA may include the commitment to expedite the claim process as soon as the insured indicates it. Their responsibility is to review all supporting documents and settle the claim either cashlessly or on a reimbursement basis. TPAs also manage other services, such as ambulances, wellness programs, and so on, in addition to the claim process.

The health insurance industry has witnessed substantial growth over the last five years to 2021. The industry has benefited from an aging population due to the aging baby boomer population. COVID-19 has also had a positive impact on the health insurance industry. The coronavirus outbreak is expected to boost healthcare insurance growth in a relatively under-insured market by increasing health coverage penetration.

At the right time, people have realized that purchasing a health insurance policy is the only way to stay financially secure during this pandemic. Following this trend, the industry is expected to grow at a compound annual rate of around 6%, reaching nearly 6.4 trillion US dollars in 2025. (Statistics from Statista) As the health and medical insurance industries expand, the TPAs market will provide lucrative opportunities.

Impact of COVID-19

Profitable opportunities in the insurance third-party administrator market are expected due to the COVID-19 outbreak. Demand is likely to be driven by the adoption of digital technology in insurance and rising demand for third-party administrator solutions hosted or managed in the cloud.

Furthermore, there was an increase in health insurance claims during the pandemic. As people have become more aware of the seriousness of health issues, there has been an increase in the demand for insurance. As a result, insurance companies are heavily investing in third-party administrator services to effectively handle such a large number of claims. Because of these factors, insurers are thinking about hiring third-party administrators to improve cost efficiency and business operations during a pandemic. The market is expected to expand as more people become aware of it.

Regional Analysis

According to the regions mentioned, North America will have the largest share in 2020. The primary reason is the market in the United States. The demand for insurance third-party administrators in the United States is concentrated and fragmented. High competition is the primary negative factor affecting this industry in the United States, while low revenue volatility is the primary positive factor. Consumers' disposable income rises, allowing them to buy cars, houses, and other assets that require insurance.

In addition, higher per capita disposable income allows individuals and households to increase coverage by paying higher premiums for health, life, property, and casualty insurance. Furthermore, the COVID-19 pandemic has positively impacted the US insurance industry. As the number of claims increased, many insurance companies began to invest in third-party administrator services.

Asia-Pacific is a significant market expected to grow at the fastest CAGR. With the rise of medical tourism, many Asian hospital chains are positioning themselves as centers of excellence, which will lead to TPA collaborations with healthcare providers. Furthermore, TPAs are destined to play an ever-increasing role in controlling Asia's healthcare costs and ensuring quality healthcare.

Key Highlight

• The global insurance third party administration market was valued at USD 400.27 billion in 2021 and is expected to grow at a CAGR of 6.48% during the forecast period.
• Based on Insurance type, Health Insurance acquires the largest share and is expected to grow at a CAGR of 6.87% during the forecast period. 

Competitive Players

1. Crawford & Company
2. Sedgwick
3. UMR
4. Gallagher Bassett Services Inc.
5. Corvel Corporation
6. Helmsman Management Services LLC
7. ESIS Inc.
8. Maritain Health
9. Healthscope Benefits
10. Charles Taylor
11. Others

Recent Developments

1. May 2024- Sedgwick began the next phase of AI technology development to change the claims industry.
2. May 2024- Maritain Health's new packaged solution, Meritain Health OnPoint Solutions, answers a true need to engage members in their health.
3. January 2024- UnitedHealthcare launched a new resource to help people access a curated suite of health programs.

Segmentation

1. By Type
   1. Health Plan Administrators
   2. Third-party Claims Administration
   3. Worker’s Compensation TPA
2. By Service
   1. Claims Management
   2. Policy Management
   3. Commission Management
3. By Enterprise Size
   1. Large Enterprises
   2. Small and Medium-Sized Enterprises
4. By Application
   1. Healthcare
   2. Construction
   3. Real Estate and Hospitality
   4. Transportation
   5. Staffing