Third Party Administrator Life Insurance
In the simplest terms, third party administrators conduct operational and back-office administrative services on behalf of an insurance company, often acting as the insurance claims adjusters. Historically, third party administrator life insurance was claims processing for plan sponsors such as health insurance plans and workers compensation. The TPA processes applications, pays claims, rejects policies, etc. In addition, TPAs provided ancillary services such as plan administration and management. Some readers may be familiar with TPAs that manage employee benefits on behalf of an employer.
A life and annuity TPA follows the same playbook but specific to the needs of the life and annuity industry, and to the business case for hiring a TPA. Some of the reasons a carrier might contract out for TPA services include:
- Accelerating time-to-market for launching new products
For example, a life insurance carrier wants to enter the annuity business to capitalize on the favorable interest rate environment. The market opportunity is immediate but building an innovative new product for a new market with limited domain expertise and legacy technology can take years and millions of dollars. To get to market quickly and cost-effectively, carriers will hire a TPA to run the new business.
Similarly, if an insurer is adding a new distribution channel, such as moving from captive to 3rd party distribution, and lacks the expertise and technology to get the new channel up and running quickly, a TPA can help.
In other use cases, a private equity company may enter the insurance market through an acquisition. A TPA can get the new company up and running in a matter of months for a fraction of the cost.
- Cost-effective conversions
An insurer may use a TPA to convert a closed block (a group of policies that are no longer actively sold, but still require administration). Over time, as the number of policies in a block declines, the per-policy cost of servicing increases. For this reason, many insurance companies look to offload the administration of closed blocks to a TPA to save money.
In fact, during the economic downturn of 2008-2009, the “Great Recession,” many life insurers required fast access to capital and sold blocks of closed business (often at a discount) to private equity firms.
In some cases, a TPA may be brought onboard to support platform modernization and/or legacy platform consolidation efforts. Lastly, TPAs can also support reinsurance with administration.
In summary, life and annuity carriers hire TPAs to accelerate growth (achieved through speed-to-market) or cost optimization (converting closed blocks). Most TPAs can service both needs, but the choice of TPA is based on the best combination of services and technologies that meet the needs of the customer.
What Life Insurance Services Can You Outsource to a Third Party Administrator?
At the highest levels (think processes such as claims or basic capabilities such as a call center), most TPAs might look similar at first glance. In truth, there is a lot of variety in the services provided and, more importantly, how the services are provided. Basic services provided by a TPA in life insurance often include:
- new business processing
- agent licensing and appointments
- mailroom processing
- billing and collection
- claims processing
- transaction processing
- compensation processing
- policy management
- post issue administration, correspondence and/or call center
- accounting, financial operations, statements, and document management
- distribution support
- administer retirement plans
- negotiates reinsurance terms and conditions
- business controls, regulatory support, reporting
- print and mailroom
Today, most TPAs provide a combination of services and technology. It’s important to understand the nuances of each before you decide which TPA to hire.
What to Look for in a Third Party Administrator Service Provider
Once you’ve confirmed that a given TPA can service your processes, it’s time to look ‘under the covers’ at how services are provided. Traditional TPAs in life insurance and annuities emerged more than a decade ago and many continue to rely on technology stacks that are fundamentally outdated. As a result, cost of services can be higher than a TPA that has invested in the underlying technology and ultimately automated processes previously handled manually.
Given the rapid pace of change in technology, a TPA’s ‘platform’ matters more than ever. Advanced digital technologies such as automation, AI, data capture and analytics, and flexible architectures combined with proven best practices reduce complexity, risk, and costs.
For example, at Zinnia we are focused on technology-enabled services, not services without technology. We are working towards a new model for TPAs services that are largely driven by technology.
We believe that the future of third-party administration will be built on a robust ecosystem of fully integrated capabilities and micro-services. From new business to processing to post issue administration, Zinnia delivers across the end-to-end service value chain for the life and annuity industry.
It’s also important to note that a TPA statute and regulations can vary by state, and that other regulators typically hold the insurance company responsible for services provided by the TPA. TPA licenses are required in 37 states, and the TPA license is issued by the relevant state insurance home state authority. For more information on the NAIC model law (from the National Association of Insurance Commissioners) that governs TPA groups, please visit: https://content.naic.org/cipr-topics/naic-model-laws.
In other words, from a risk-management perspective, you’ll want to be sure to do due diligence and contract with a fully licensed TPA, in addition to being a strategic TPA partner that will future proof your technology capabilities.
Zinnia’s Unique Third Party Administrator Life Insurance Offering
Leveraging advanced, enterprise-scale technology, Zinnia’s digital third-party administration platform features state-of-the-art, multi-tenant-based architecture to nimbly deliver services that accelerate growth and reduce cost and complexity.
Moreover, our TPA services have the benefit of almost two decades of best practices that we’ve used to digitally standardize processes and a proven track record in the market as SE2. This combination of advanced technology and proven, standardized processes enable Zinnia to improve productivity and reduce costs and operating risk while supporting regulatory compliance and improving speed to market.
If you are looking to get to market faster with new products or convert complex blocks from other third-party and/or homegrown systems, Zinnia TPA Services have you covered. We are focused on delivering exceptional experiences and outcomes for key stakeholders across the value chain.
Some of the TPA services and life insurance management systems that Zinnia offers includes:
- A full range of mail operations
- End-to-end distribution support
- Post-issue administration services
- Business processes, controls, and regulatory support
- New business processing
- Consumer and producer self-service portals
- Robust call-center capabilities
- Correspondence and print services
- Finance operations, pricing, and trading
Why Zinnia for Third Party Administrator Services?
Zinnia currently supports more than thirty life and annuity carriers, and process more than $20 billion in premiums each year. Through our TPA services, we launch products and support new business for nearly have, with an average of about twelve new products per year for our customers.
We also recognize that a life-insurance carrier may want to keep certain services internally, like a call center for example. Zinnia offers a flexible TPA model that allows clients to keep certain segments and services.
From incoming new business to paying claims, to pricing and trading and regulatory compliance, Zinnia has the advanced technology and experience needed to deliver exceptional insurance experiences.
Get to Know Zinnia
If you are more familiar with SE2, it’s time to learn more about Zinnia, because we have made a lot of changes. For many years, we’ve been bringing together insurance experts with entrepreneurs from the fields of technology and data science to deliver new products for the life and annuities industry. We have invested in our technology platforms and capabilities and innovated to deliver full-stack digital services.
We have a vision for Open Insurance, bringing together people, data, and technology to create insurance experiences that are more inviting for consumers, more empowering for insurers, and more productive for insurance general agents.
Today, Zinnia is focused on delivering clients across the industry a modern open insurance experience and the tools needed to reimagine how life and annuities are bought, sold, serviced, and experienced.
For more information on Zinnia TPA Services, please see our TPA Services Product Sheet.
To learn more about Zinnia, please check out the following resources: