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Here's why TPAs matter to the insurance industry.

Byline: Patricia L. Harman, PropertyCasualty360.com

Third-party administrators (TPAs) provide a variety of services to the insurance industry. For some companies, they help expedite claims while providing timely customer service and helping to maximize a customer's assets. They may also provide risk management, billing services, data and analytics, and in some cases subrogation expertise. The types of claims they handle may include general liability, water damage, restoration, construction defect, automobile, property and casualty, product liability, professional liability and employment practices to name a few.

Some clients view them as an extension of their claims departments, providing valuable manpower at a time when resources may be tight, but the need to provide excellent customer service is higher than ever. Whatever their role, as the industry has changed, so has that of the TPA.

We spoke to Mark Bernstein, vice president and director of national accounts for Carl Warren & Company, a national company that offers a range of claims management and third-party administrator solutions. He shared with us the role of the TPA, what to look for when hiring them and how to work with them effectively.

PC360: What is the role of the TPA for today's insurers? How has it evolved over the last 5 years?

Bernstein: The industry has changed dramatically over the last three to five years. Starting with the economic setbacks the country endured, many companies were required to change their corporate structure and combine roles. Among the hardest hit industries were the risk management and claims departments. This led to a very different role for the TPA. Now reporting to finance, treasury and/or human resources rather than risk managers, the focus became almost purely cost reduction.

TPAs needed to learn to be more efficient, more productive and more cost-effective in claims handling. They also had to become educators and teachers as many now responsible for oversight of claims and litigation management were not as versed in the technical side of claims handling as risk managers. Many also relied more heavily on the TPA to guide claims handling and truly be an extension of a claims department that had seen a reduction in personnel.

PC360: What types of claims should an insurer have a TPA handle and why?

Bernstein: A well-rounded TPA should be able to handle any type of matter that comes across their desk. Many have extensive expertise in a host of different areas. The TPA is an investigator, a strategist, litigation manager, and should be an extension of any claims department they are working with. They have the ability to be that conduit between the client and the carrier and also insulate the client from the day-to-day communication and compilation of documentation and evidence that is required to handle a claim effectively.

Increasingly important is the ability of the TPA to help reduce costs by taking on certain claims handling responsibilities that are not within the purview of a defense attorney. If the relationship is strong and there is a true partnership and understanding of roles, defense counsel, the TPA and the client they serve can have a true tripartite relationship where the attorney can concentrate on the legal aspects of a specific matter after securing any and all investigative information from the TPA. This makes for a far smoother working relationship and ultimately reduces costs for the client.

(Image: Shutterstock)

PC360: What are the benefits of using a TPA vs. handling the claims in-house?

Bernstein: In many instances the TPA is the buffer between the client and their customers. Well-versed claims professionals working together and promoting the philosophy of the client can be of great benefit to a company. From a pure financial aspect it is most often less expensive to retain the services of a TPA than to establish a full-blown claims department in-house.

From the relationship aspect alluded to previously, a TPA can be that calming influence, providing information, being communicative, assisting customers and presenting information without the company name attached to them. While promoting the company name and placing the company brand in the most positive light possible, there remains a certain distance between the name of the company and the TPA representative that might allow for a different rapport to be established that would benefit the claims handling experience for all.

PC360: What should an insurer look for when selecting a TPA?

Bernstein: They must above all have integrity, honesty and values. The TPA needs to be a good listener. What is the claims handling and litigation management philosophy of the company, and how will the TPA promote that philosophy? The TPA needs to be void of ego; providing information, communicating the good and the bad, making recommendations and then allowing the client to make the final determination as to how the matter should proceed.

The TPA should be owners; of the claim, of the philosophy and of any file they handle. They need to have the mentality that a specific matter needs to be handled in the best interest of all of the parties involved. The TPA needs to fit the claims handler to the specific needs of the client. In today's industry there are too many instances where the claims handler does not have the expertise in a specific field or with a specific product that best supports the needs of the client. Ultimately that causes costs to be increased and claims to proceed less effectively.

The TPA needs to provide clear lines of responsibilities, have access to appropriate technology and be fluid. As the industry changes, TPAs need to be able to change as well. Whether it is the type or scope of the data collected, the storage of said data, the reporting of said data and/or the growth of a specific company, the TPA needs to be able to move in the same direction as the clients they serve.

Finally, the TPA needs to show consistency. They must provide quality assurance metrics and cost analysis that show the client that the claims are being handled and service is being provided that is professional, timely and cost effective.

(Photo: Shutterstock)

PC360: What kind of training should a TPA provide to its staff to ensure they are knowledgeable about current claims practices?

Bernstein: There are so many opportunities in today's industry to obtain training for TPA personnel; whether via in-house training, exceptional training within the industry by claims and/or legal organizations, or online opportunities. The TPA needs to be up to date and versed in the specific area of practice and types of claims being handled. They need to be aware of any jurisdictional changes in the states where they handle claims. They need to be aware of and maintain appropriate licenses to be more available for clients. Refreshers are also always important. We tend to forget to keep ourselves fresh and up-to-date even in those areas of expertise. The TPA needs to have a working knowledge of the laws in specific jurisdictions, appropriate timelines for adherence to rules and regulations, and trends in the industry.

PC360: What challenges do TPAs face and how can they address them effectively?

Bernstein: Today's TPA is working more files, more hours and for more people. I am concerned that the work/life balance of today's claims professional is less balanced. Technology is ever changing, and the expectations of "doing it now" and "doing it faster" are a heavier burden than ever on that professional.

The TPA is challenged with multiple generations of customers who have different ideas about responsibility, understanding of responsibility and the "want it today" mentality. This causes TPA professionals to utilize all of their tact and people skills to establish rapport to handle claims effectively. Customers have many choices and the TPA must be mindful of the need to maintain the proper communication to promote the brands of their customers.

There are also ever-evolving carrier responsibilities due to new legislation, the world of identity theft, cyber security and the like. While claims handling used to be the priority, that has now shifted to include data compilation, data security, and reporting responsibilities.
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Publication:Property and Casualty 360
Date:Apr 14, 2015
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