Insurance TPA Market by Service Type (Health Insurance, Property and Casualty Insurance, Workers' Compensation Insurance, Disability Insurance, Travel Insurance, and Others), Services (Claims Management and Risk Control Management), and End User (Healthcare, Construction, Real Estate and Hospitality, Transportation, Staffing, and Others) – Global Opportunity Analysis and Industry Forecast 2023–2030

Market Overview

Insurance TPA market was valued at USD 307.79 billion in 2022 and is projected to reach USD 511.48 billion by 2030 at a CAGR of 4.8% from 2023–2030. A third-party administrator (TPA) is a company that offers administrative services for an insurance plan, such as health insurance. TPAs act on behalf of the insurance plan, providing various services, such as claims processing and risk management. They earn commissions from the insurer when premiums are paid for health insurance coverage.

TPAs are used by large insurance companies or a business that is self-insured to complete administrative tasks that might otherwise be time-consuming or cost-ineffective. TPAs may charge fees for specific services, allowing them to generate income through both fees and commissions, depending on the range and volume of services provided. Insurance companies engage TPAs to assist in managing tasks like provider networks, claims processing, membership functions, and other administrative responsibilities.

TPAs serve as a bridge between the insured and the insurance company. The usage of third-party administrators is now widespread in numerous industries and their scope of work is expanding. They play diverse functions in the operations of investment companies, commercial liability insurance and the health insurance sector.

TPA's primary function is to make sure that policyholders receive better services. The introduction of TPA benefits both the insured and the insurer. While the insured gains from the 24-hour service, the insurer gains from a decrease in administrative costs. Insurance TPAs facilitate efficient claims settlement process, management & investigation of claim requests and offer direction on the appropriate form of paperwork.

Rising demand for insurance across the globe

The rising demand for insurance is creating new opportunities for insurance TPAs. TPAs are able to help companies and individuals to obtain the insurance they need and to save money on their premiums. They are also able to provide a more personalized service than traditional insurance companies. As the demand for insurance continues to rise, the insurance TPA industry is expected to grow.

TPAs are well-positioned to capitalize on this growth and become an increasingly important part of the insurance industry. Moreover, the growing awareness regarding the need for insurance to mitigate financial risk of the huge burden of bills fosters the growth of the insurance TPA industry. Furthermore, the ease of affordability of insurance is playing a crucial role in thriving the growth of the TPA market. As the cost of insurance is becoming more affordable due to competitiveness and the use of new technologies.

Rising healthcare expenses accelerate the demand for TPA

The need for third-party administrators is anticipated to increase due to the rising expense of healthcare. The expense of healthcare has experienced a boom over the past few years, and this growth is anticipated to continue due to the rise in chronic diseases such as cancer, diabetes, and heart diseases. By reducing costs without compromising the quality of employee healthcare, TPAs have established themselves as a vital asset to self-insuring programs.

In addition to extending lives and improving health, medical advancements raise spending and encourage excessive use of expensive technologies. This contributes to prompts both patients and physicians to demand the most advanced & expensive treatments and technologies available. This increases the cost of treatment of diseases. Thus, investors are now paying attention to TPAs that provide efficient management of claims and offer transparency in the insurance process which accelerates the growth of the insurance third party administrator market.

Emerging startups that are reshaping the landscape of operations in the TPA industry

In the TPA sector, numerous startups are emerging that are redefining the traditional TPA business model by placing greater emphasis on streamlining processes through automation and faster claims handling. Additionally, they prioritize providing transparent and reliable customer service to achieve satisfaction, comprehensive care, and efficiency. These companies offer a user-friendly interface and tailored benefit management, placing them at the forefront of the rapidly evolving TPA industry. It included companies, such as Flume Health Inc., Maestro Health, Empyrean, and others.

These startups have adopted a radically distinct approach to employer health plans. With the growing demand for innovative health technologies, startups worldwide are exploring unconventional methods to make healthcare more efficient, effective, and affordable. Some are facilitating connections between patients and local healthcare providers, while others are emphasizing preemptive care. Many are also reimagining how patients purchase and pay for healthcare. Despite their differing approaches to efficient and effective healthcare, these companies share a common focus on patient-centric care and benefit advisory services. It includes companies, including ICHRA (Flyte HCM), SimplePay Health, Sana, and others.

Concerns related to cybercrime are likely to hinder the industry

In the market, numerous insurers engage in competition and often depend on TPAs and external suppliers to ensure the seamless functioning of their operations. Consequently, TPAs are entrusted with the management of various administrative tasks for the organization. Their responsibilities include acquiring and safeguarding confidential participant data, as well as ensuring the timely distribution of rewards.

The market for insurance TPAs faces a significant constraint due to concerns surrounding security and privacy raised by external entities. Additionally, TPAs are primarily threatened by cybercrime, which has negatively impacted their reputation through unauthorized access to client information. As per the analysis of the latest data breach report by IBM Security, the data breach cost increased from USD 3.86 million to USD 4.24 million in 2021.

Lack of technological adoption

Traditional TPAs continue to heavily depend on manual operations despite the existence of software that could automate numerous tedious and repetitive tasks associated with administration services. These manual procedures often entail time-consuming email chains, excel spreadsheets, and lengthy phone calls, specifically during the claims process.

Furthermore, the efficiency of the claims process is hampered by employees' limited understanding or experience in promptly and accurately documenting information. Mistakes such as completing incorrect paperwork, submitting wrong forms, misplacing essential documents, or experiencing delays in gathering materials are common occurrences that further impede the claims process.

Edge-cutting technologies that are boosting TPA industry

Technology is driving the evolution of our lifestyle and influencing both individuals and industries. The advancements in technology within various industries have intensified the competition among insurance companies. Utilizing technology, insurance companies can now reach a larger audience and ensure underwriting based on data. Moreover, the continuous progress in technology empowers TPAs to efficiently handle claims and other processes, leading to improved insurance services, exceptional customer experience, and reduced operational expenses.

The growth of the insurance TPA market is anticipated to receive a significant boost from technological advancements, including wearable technologies, blockchain, and artificial intelligence (AI). Wearable technologies like fitness bands and other gadgets grant insurers access to policyholders' real-time health information, allowing for monitoring of physical and health-related activities. This valuable data facilitates the provision of personalized insurance products with the help of wearable technology.

As a result, the utilization of technology by TPAs in managing claims and other processes ensures efficient insurance services, provides exceptional service, and reduces operational costs. These factors create significant growth opportunities for key market players in the insurance TPA market in the years ahead.

North America market holds the dominant share in insurance TPA

The increase in the prevalence of chronic diseases, such as cancer, heart disease, and diabetes, is attributed to unhealthy habits like smoking, alcohol consumption, and an unhealthy diet. Consequently, there has been a rise in the number of insurance policies, prompting insurance companies to outsource their services to insurance TPAs for efficient claims management and processing in this region.

The Centers for Disease Control and Prevention reported that in 2020, there were 697,000 recorded deaths caused by heart disease. Additionally, it is stated that cardiovascular disease claims a life in the United States every 34 seconds.

Moreover, the region experiences frequent occurrences of natural disasters, resulting in damage to homes, property, and infrastructure. To enhance the quality of life for the population residing in high-risk areas and mitigate the financial impact of disasters, communities and governments are working together to strategize and adjust to the consequences of climate change.

As an example, in August 2022, the Canadian government made an announcement regarding the development of Canada's inaugural national flood insurance program. This program is designed to assist Canadians whose lives and occupations are impacted by natural disasters, while also helping communities cope with the growing challenges of climate-related risks and disasters. Consequently, this initiative leads to an increase in insurance claims, thereby driving the market growth of insurance TPAs.

In addition, the insurance TPA market in the region benefits from the strong presence of major key players like Sedgwick Claims Management Services Inc., Gallagher Bassett Services Inc., Crawford & Co., and CorVel Corp. Their participation is anticipated to drive market growth as these players implement diverse strategies such as product launches and acquisitions to uphold their market leadership in the insurance TPA sector.

For instance, in April 2022, Gallagher Bassett International Ltd (GB) acquired Claims Settlement Agencies Ltd (CSA) to expand its portfolio of services and expertise, thereby enhancing the offerings provided to both new and existing clients by GB. Additionally, this acquisition opens up opportunities for GB to cross-sell a wider range of products and services to underwriters and insurers with whom they have not previously collaborated.

Europe is growing steadily in terms of insurance TPA

The increase in the prevalence of chronic diseases, such as cancer, diabetes, and heart diseases, is responsible for the surge in the number of health insurance policies in this region. Based on the most recent data published by the WHO in 2020, the number of deaths attributed to Coronary Heart Disease in Germany reached 147,055, accounting for 20.98% of the total deaths. As a result, there has been an increase in the number of health insurance policies held by individuals in the country, leading to a growing demand for insurance TPAs to effectively manage and process the higher volume of claims.

Moreover, the insurance industry in the region has reached an advanced level, particularly in the life sector, with substantial penetration and density. Which has contributed to the high adoption and utilization of insurance services. According to the International Monetary Fund (IMF), the United Kingdom stands as the fourth largest insurance market worldwide, with gross written premiums reaching USD 331.63 billion in 2020. The significant penetration of insurance policies in this region results in an increased demand for insurance TPAs to effectively handle, manage, and process the large volume of claims efficiently.

In addition, the presence of a growing elderly population in countries, such as Russia, Germany, and Italy has led to an increased uptake of health insurance policies. This is due to the rising occurrence of health diseases among older individuals and the subsequent high medical expenses they incur. Health insurance policies offer financial coverage to mitigate these costs, resulting in a higher number of insurance policies being acquired. Consequently, this is expected to drive the growth of the insurance TPA market in the region. Based on World Bank data, the population aged 65 and above in Europe was estimated to be 758.63 million in the year 2021.

Competitive Landscape

The insurance TPA market trends include various market players, such as Sedgwick Claims Management Services Inc., United HealthCare Services (UMR) Inc., Crawford & Co., Gallagher Bassett Services Inc., CorVel Corp., Meritain Health, ESIS Inc., Helmsman Management Services LLC, Trustmark Health Benefits Inc., and Cannon Cochran Management Services Inc., dba CCMSI. These market players are adopting several strategies such as product launch, collaboration and acquisition across various regions to maintain their dominance in the insurance TPA industry.

For instance, in July 2022, EXL and Xceedance collaborated to provide insurers with property and casualty claims services along with digital TPA solutions. This collaboration enables the delivery of an enhanced and modern claims servicing experience to insurers. By joining forces, these key players in the industry contribute to the benefit of consumers by offering digital TPA services throughout the forecast period.

 Also, in April 2022, Gallagher & Co. acquired Claims Settlement Agencies Ltd (CSA) to enhance its scale and offerings. Through this acquisition, CSA gains access to a wider range of services and expertise provided by GB, benefiting both new and existing clients. Additionally, this acquisition opens up opportunities for GB to cross-sell additional products and services to underwriters and insurers. Such acquisitions among key players have proven beneficial in expanding business operations during the forecast period.

Moreover, in March 2022, Charles Taylor introduced 'InHub,' an innovative solution aimed at enhancing outcomes within the insurance value chain. InHub functions as a cloud-based SaaS capability hub, offering a connected experience for the TPA insurance market and its customers. This new launch of insurance products intensifies competition among industry players, driving them to innovate and deliver advanced products that effectively meet customer needs and expectations.

INSURANCE TPA MARKET KEY SEGMENTS

By Type

• Health Insurance

  • Diseases Insurance

  • Medical Insurance

    • Senior Citizens

    • Adults

    • Minors

• Property and Casualty Insurance

• Workers' Compensation Insurance

• Disability Insurance

• Travel Insurance

• Others

By Services

• Claims Management

• Risk Control Management

By End User

• Healthcare

• Construction

• Real Estate and Hospitality

• Transportation

• Staffing

• Others

By Geography

• North America

  • U.S.

  • Canada

  • Mexico

• Europe

  • UK

  • Germany

  • France

  • Italy

  • Spain

  • Denmark

  • Netherlands

  • Finland

  • Sweden

  • Norway

  • Russia

  • Rest of Europe

• Asia-Pacific

  • China

  • Japan

  • India

  • South Korea

  • Australia

  • Indonesia

  • Singapore

  • Taiwan

  • Thailand

  • Vietnam

  • Rest of APAC

• RoW

  • Latin America

  • Middle East

  • Africa

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