The study pegged the program administration market in 2011 at $24.7 billion in premiums up from $22.6 billion in 2010. The 2010 market figures were revised to reflect the higher level of response in the survey and research completed this year. The survey identified a potential 950 program administrators administering an estimated 2,000 individual programs.
Premium revenues increased 5 percent. Program Administrators reported an 84 percent renewal rate in 2011, unchanged from 2012. The research consisted of two surveys – one distributed to Program Administrators and a second distributed to insurance carriers that use the program distribution channel.
Response from program administrators more doubled this year with 190 program administrators responding to the survey. The question topics for the 2012 survey were designed and reviewed by a committee of TMPAA member Program Administrators and Carriers, the TMPAA Board, Advisen and the New Street Group (TMPAA Special Consultant for the Program Business Study).
The research study and survey was conducted by Advisen, the commercial insurance research and data analytics firm. The analysis included a survey of program administrators, carriers and managing general agents. Additional data and information was drawn from the Advisen databases of retail brokers, managing general agents and underwriters and wholesale brokers.
The key results of the study were:
- The program space continues to be a booming business despite the significant headwinds faced by the overall P&C industry.
- Program administrators and carriers are optimistic about prospects for future growth.
- There is mismatch in the merger & acquisition picture as there are more buyers than sellers.
- Program administrators and insurers are one in their view that underwriting profitability is what matters most when establishing a successful program.
The TMPAA defines “Program Business” as insurance products targeted to a particular niche market or class, generally representing a group of similar risks placed with one carrier. Administration is done through Program Specialists who have developed an expertise in that market. Administrative responsibilities are negotiated between the Specialist and Carrier, but would include underwriting selection, binding, issuing, billing, and often times marketing, premium collections, data gathering, claims management/loss control and possibly risk sharing. Program Specialists typically target their niches through differentiation either in product, risk management services, delivery mechanism or price. Specialists can distribute these programs on a retail or wholesale basis.
Click here to access the 2012 State of Program Business Executive Summary.