Program Snapshots

Program business comes in all shapes and sizes–even definitions. What looks like an insurance program to one might not be a program to another.

Program business can be difficult to pinpoint, according to Ray Scotto, executive director of the Target Markets Program Administrators Association, which aims to distinguish the program market as a market unto itself.

TMPAA defines program business as “insurance products targeted to a particular niche market or class, generally representing a book of similar risks placed with one carrier. Administration is done through Program Specialists who have developed an expertise in that market or class.”

Scotto knows his group’s definition is specific and not all might subscribe to it. “I’m sure you could probably ask a lot of folks if they have a program and they will say yes, but you’d have to dig down to find out what that means to them.” Scotto says that to some wholesalers, a “program” might mean they have a large book of homogeneous risks. “But they don’t have a single carrier, they don’t do the marketing, they are not responsible for underwriting it, claims or whatever,” he said.

The absence of a formal understanding of what a program is and how it is defined may help explain why measurements of the overall program market are hard to come by as well.

But Scotto has his estimates.

Just judging by the size of TMPAA members’ businesses, Scotto estimates that the program marketplace is about $26.5 billion. “We believe that there’s probably about 1,000 to 1,500 program administrators nationwide,” Scotto added.

Scotto acknowledges that his number may seem a bit high since others peg the size of the program market to be between $10 billion to $20 billion. But he added that his association came up with the estimate based on what their membership.

Program market expanding
However big the program market is today, it’s getting bigger. Program managers are experiencing an expansion in businesses opportunities.

“They [program carriers] are more open to looking at opportunities but they still want to look at opportunities that limit their potential risk,” said Art Siefert, president of U.S. Risk Underwriters, who also serves as president of TMPAA.

Greg Thompson, chairman and CEO of Thomco who also serves as president-elect of TMPAA, predicts additional carrier interest in program business is yet to come. “I think that carriers, as the market softens somewhat, are much more willing to work with program administrators to enter a specialty market,” Thompson said. He added that while the program market seems to be expanding rapidly insurers continue to favor larger programs–those over $5 million–leaving a gap in the market for smaller programs.

“I think there are more carriers out there that will consider smaller programs,” he said, “however, that’s growing very slowly.” Thompson added that while TMPAA has been able to attract some carriers that will write small programs, still only about 20 percent of their member carriers fit that bill.

One thing that Siefert, Thompson, Scotto and other professionals part of TMPAA agree on is that program administrators are indeed specialists–specialists in one, two or even several niche industries depending on the firm.

Being a “specialist” is the key.

“We will focus on one industry and we’ll get to know that industry so well that underwriting guidelines will really be a cooperative effort from the program administrator and carrier and will not just be designed exclusively by the carrier,” Thompson told Insurance Journal.

Topics Carriers