Insurance Third Party Administration Market

Market Overview

The global insurance third party administration market size was valued at USD 399.37 billion in 2023 and is expected to reach USD 756.24 billion in 2032 at a CAGR of 8.3%. A third-party administrator or TPA is a business that handles administrative tasks for a health plan, such as billing, plan design, and claim processing. Today, TPAs have gained impetus in various companies, and their scope of responsibilities is growing.

TPAs comprise a variety of responsibilities in the health insurance industry, commercial liability insurance, and investment firm operations. In addition, market firms have decided to enter into new areas such as forensic accounting, worker's compensation audits, and emergency response planning.

Market Dynamics

Insurance Third Party Administration Market Drivers

• Rising Importance of Technology in Third-Party Administrators:

The TPAs are called government-regulated organizations that act as intermediaries between providers and policyholders. They are responsible for handling operational processes for insurance companies, such as claims processing, benefits administration, and enrollment, among other things. TPAs used to rely on mutual intervention strategies that were ineffective and resulted in high errors. Thus, the introduction of technology in this market has turned the table by making the process more efficient today.

Processing of claims is much more challenging, which requires processors to interpret policy conditions to understand discharge summaries. The processors must then realize which bills are related to the medical condition and must be paid. Thus, we can enjoy several benefits as we automize these core functions. Benefits such as faster claims processing, fewer human interventions, the ability to analyze and make data-driven decisions, and improved service drive the introduction of technology in TPAs.

Furthermore, TPAs have started emphasizing how they used to manage the customer experience. The newer communication channels assist the customer in attending to calls and emails without any limit. WhatsApp is becoming one of the critical platforms for connecting with TPAs to stay connected during and beyond the claims.

Assessing property damage in person is risky and can put claim professionals in jeopardy. Thus, HOVER, Inc has introduced an app that allows claims professionals to inspect the damaged property with more ease to address this scenario. Such technology facilitates the customer's claim process while making the workplace safer for employees. Thus, with the more and more technological introduction of TPAs, the demand for TPAs is expected to heave.

• The Higher Amount of Healthcare Cost to drives the demand for Insurance Third Party Administration Market

TPAs are gaining impetus mainly due to rising costs in the healthcare industry. Healthcare cost has grown significantly in the last few years. It is predicted that the price will increase ahead owing to chronic diseases getting more common.

Healthcare cost in the U.S. has witnessed a steady rise for decades and is expected to grow during the forecast period. The successful TPAs, assist their clients through plan design, reference-based pricing tools, and dual-option plan strategies. In addition, TPAs assist self-insured companies in managing their health insurance plans efficiently.

Employees take charge of their healthcare costs by self-insuring and collaborating with technology and service providers to manage the expenses. TPAs provide advantages for self-insured businesses by allowing them to focus on their core strengths and functions. Thus, third-party administrators have been seen as valuable assets in self-insurance programs and lower the cost while maintaining employee healthcare quality. Therefore, the surge in healthcare expenditure is expected to lug the demand for TPAs.

Insurance Third Party Administration Market Restraints

• Threats from Cyber Criminals are likely to Hindered the Market.

The market comprises several insurers who generally rely on TPAs and other outside vendors to help businesses run long. This gives authority to TPAs to handle a variety of administrative tasks for the organization. They are in charge of gathering and safeguarding sensitive participant information and distributing payouts on time. However, cybercriminals have been the primary threat to TPAs.

Cybercriminals have impacted the image of TPAs by breaching the details of the clients. For instance, according to the latest data breach report by IBM and the Ponemon Institute, the data breach cost in 2021 was around USD 4.24. According to Intermedia, 32% of victims go five days or longer without access to their files. TPAs are no different. TPAs are responsible for several participant data such as names and social security, DIA breach in cybersecurity can easily wipe out a participant's entire balance.

Further, there has been significant ransomware activity grown during the company. For instance, CNA Financial Corporation is one of the largest insurance companies. Furthermore, on September 14th, 2021, ransomware attacks targeted law enforcement health benefits. Names, dates of birth, social security numbers, and other personal information may be compromised. Each week, 1 in 61 organizations worldwide is impacted by ransomware attacks, according to the researchers. As a result, TPAs cannot afford to ignore cybercriminals' threats to their market.

What Are Future Key Opportunities in Insurance Third Party Administration Market

• Rising Adoption of TPAs in the Health Insurance Industry

To process healthcare claims, a third-party administrator is required. One of the responsibilities of TPAs is to review every document submitted in support of the claim and settle down cashlessly. In addition, they also look after services such as ambulances, wellness programs, etc.

As the growth in total health expenditure has been consistent for the last few years, the health insurance industry has witnessed significant change. Owing to the aging baby boomer population, the industry has benefited from an aging population. COVID-19 has also had a positive impact on the health insurance industry. The coronavirus outbreak is most likely to boost healthcare insurance growth in a relatively under-insured market

•  Increasing health coverage penetration

It signifies an important shift in the healthcare landscape, focused on broadening access to healthcare services and insurance for a larger portion of the population. This effort emphasizes the principle that quality healthcare should be accessible to everyone.As health coverage penetration increases, more individuals and communities gain access to healthcare, aiming to protect their well-being and financial security. This positive change is often driven by government policies, private sector initiatives, or a combination of both. It encompasses various forms of healthcare coverage, including health insurance, government-sponsored programs, and innovative models that ensure individuals can receive medical attention without facing financial obstacles

Regional Analysis

The Dominance of the U.S Market to Foster the North American Insurance Third Party Administration Market

The demand in North America is primarily driven by the high demand for TPAs in the United States. The third-party administrator market in the U.S. is both concentrated and fragmented. Low revenue volatility is the primary factor driving the demand for a third-party administrator. People in the U.S. have witnessed higher disposable income, which allows them to purchase automobiles, homes, and other assets that necessitate insurance. On the other hand, increased competition owing to many players' presence is negatively affecting the market.

Furthermore, increased per capita disposable income enables individuals and households to improve coverage by paying higher premiums for life, health, property, and casualty insurance. Again, the COVID-19 pandemic has positively impacted the insurance industry in the United States. As the number of claims increases, insurance companies are investing in third-party administrator services. According to IBIS World, in 2022, there will be approximately 130,984 TPAs and insurance claims adjusters' businesses in the United States, a 0.7% increase from 2021.

The Asia-pacific market is expected to be a lucrative market for third-party administrators. China holds the largest share, while India is expected to grow at the fastest CAGR. The region has enormous potential and room for growth. Countries such as China, India, Japan, Australia, and ASEAN countries are lucrative markets for third-party administrators.

Segmental Analysis

The global insurance third party administration market share has been classified based on insurance type and regions. Further, we have classified insurance types into health insurance, retirement plans, commercial general liability insurance, and other insurance.

Based on insurance types, health insurance dominated the market during the forecast year. Within the health insurance domain, TPAs serve as intermediaries, streamlining processes related to medical claims and policy administration. This segment plays a vital role in ensuring the smooth functioning of health insurance operations. In addition, the improvisation in the claim management system has also propelled the market growth.

The retirement plans acquire the second place in insurance type. The retirement insurance, often related to pension plans and annuities, benefits from TPAs' expertise in managing these long-term financial products. TPAs ensure the seamless distribution of retirement benefits Retirement planning regulates retirement income goals, actions, and decisions necessary to fulfill those goals.

TPAs specializing in CGL insurance aid businesses in managing liability claims, a critical function to safeguard against legal and financial consequences. Commercial general is an insurance policy that provides coverage to a business in bodily injury, property damage, and personal injury caused by the business's operations, products, or injuries that occur on the business's premises.

Impact of covid-19

The COVID-19 outbreak is expected to open up new insurance third party administration market opportunities. The introduction of digital technology in insurance and the rising demand for TPAs solutions managed on the cloud are predicted to heave the market.

Also, there was a growth in health insurance claims during the pandemic. Thus, insurance companies have emphasized investing in TPAS services to efforts to a greater extent. These factors have boosted the morale of insurance companies to consider TPAs for improving efficiency and business operations during the pandemic.

Market Recovery Timeline and its Challenges

The market is witnessing growth owing to the surge in technology and the growing concern of people after the COVID-19 pandemic attack. Very few TPAs have addressed the changing needs of the insurance industry and thus are focusing on building the requisite capabilities in data, talent, and technologies. Due to this, the market is expected to quickly return to the pre-pandemic level.

Although some TPAs are gaining momentum to their pre-pandemic level, few TPAs lag. Such TPAs face significant challenges such as rapidly changing rules and regulations, ever-changing employer and employee health needs, staff retention, recruitment, growing security concerns, and technological limitation in some areas.

Recent Developments

• April 6th, 2022- Sedgwick's made its comprehensive managed care services available as an independent offering. The company's independent managed care solutions give the client the power to choose just one or several from their entire suite of services.
• March 8th, 2022- Sedgwick acquired the business of UK Assitnace247 Ltd, a leading provider of home emergency repair fulfillment services in the U.K.
• October 7th, 2021- Crawford and Company launched Asservio's SaaS, a cutting-edge automated and digitalized platform that improves efficiency management and claims processing.
• ESIS Inc introduced ECOS, the newest TPA claim system in the marketplace. ECOS is built to support more effective and efficient claim management and provide deeper insights, enhanced program configurability, and empowered claim management through system-driven workflows and process automation
• December 7th, 2021, CorVel corporation launched CogencyIQ. CogencyIQ provides a comprehensive solution to customers.