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What Do You Want, Expect and Deserve From a Third Party Claims Administrator?

In the previous soft insurance market, many commercial entities historically passed off risk to the insurance sector, taking little or no loss participation. They necessarily relied on the claim expertise (or lack thereof) of the insurer they chose and had virtually no input on how their claims were resolved. In the present, much more difficult insurance market, most of these same commercial clients were required to take part in the loss process by totally self-insuring some risks while taking significant retentions for the larger, more volatile liability exposures. Many commercial risks had no first-hand experience in actually handling their own loss activity and as a result, a large number of them turned to third party claim administrators. This discussion concerns the very necessary ability to properly gauge and evaluate prospective third party claim administrators. As a risk manager, safety director or claim handler for your company, ask yourself the following questions:    

Does your current insurer or TPA:    

  • Share the same mentality about spending your claim dollars that you do?
  • Work with you in a team effort to control exposure and cost.
  • Take a sincere interest in educating themselves on the specific nuances of your business?
  • Continuously update you on legal / claim issues pertaining to your industry?
  • Provide you with tangible written updated reports on your claim activity as it develops until final resolution?
  • Bring you into the process prior to making substantive dollar impact decisions?
  • Make periodic visits to your facility to discuss pending claim issues.
  • Provide claim management seminars on site?
  • Partner with you on vendor selections?
  • Identify and consult with you on the specific reasons for your loss cost variance trending?
  • Provide you with a dedicated and experienced team that understands your needs?
  • Truly care about doing all they can to lower your loss costs?

    If you answered no to any of these questions, perhaps the TPA relationship needs a bit of nurturing or possibly a change is necessary. In today's market, it's your money that is at risk . As a traditional commercial insured, it was at one time, very comfortable to know that even on the most insignificant claim, the insurer would absorb the loss. Those days are gone, at least for now. Today, commercial risks need to develop very much of a hands-on approach to not only how their claim dollars are spent, but they also need to be influential in determining the strategy of how their claims are attacked. Today's risk needs to set the tone for the TPA. Undoubtedly, they need to plug-in and take advantage of whatever expertise and basic services are offered within the culture of the TPA, but they cannot afford to simply allow a TPA to make significant decisions on their behalf without being part of the process. No more sitting on the sidelines .

    With the prevalence of high SIR's and liability deductible levels, today's commercial risk needs to partner with a TPA on major or substantive claim issues and develop an overall game plan that is congruent with the goals of the client. My advice is to not get stuck or become satisfied with the TPA's traditional way of doing things. Carve your own path by creating your own set of requirements, set the reserving philosophy, participate in vendor selection, decide on how the TPA is to report to you and how often, decide on the choice of people that actually handle your claims, take part in developing strategy as claims unfold, in essence, design the performance criteria for the TPA. These are all things that you could not do when your insurer's claim department handled your losses from dollar one. Remember, your money is at stake now and being passive is not an answer.