Program Business Hits $24.7B in 2011: Study

The program business market reached $24.7 billion in gross written premiums in 2011, a 9 percent increase from $22.6 billion in 2010, according to a new industry study. Premium revenues for the program industry jumped 5 percent.

That’s according to the “State of Program Business Study” conducted by the Target Markets Program Administrators Association (TMPAA), an annual study, which documents the size, characteristics, growth and other base-line information about the program insurance market.

This year’s survey identified a potential 950 program administrators administering an estimated 2,000 individual programs.

Program administrators responding to the survey reported an 84 percent renewal rate in 2011, unchanged from 2012.

Other key findings in the “2012 State of the Program Business Study” include:

• The program space continues to be a booming business despite the significant headwinds faced by the overall property/casualty industry.
• Program administrators and carriers are optimistic about prospects for future growth.
• There is mismatch in the merger and 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 majority of program administrators polled reported increases in premiums administered between 2010 and 2011. One-third saw premiums administered rise by 10 percent to 25 percent. The average increase reported for 2011 was 9 percent compared to 4 percent in 2010.
• Across industries, program administrators recorded the largest volume of premiums in government, nonprofit and education; construction; and transportation. The lowest volume, on the other hand, was seen in retail, financial services, and leisure.
• The program administrators surveyed reported having a program with 55 carriers in the past five years. On top of their list when it comes to being an excellent program partner are: Meadowbrook Insurance Group, Western World Programs, Great American Insurance, Liberty International Underwriters, and Markel Programs.

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 that 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.

About the Survey

The overall 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 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.