Target Markets leaders see now as good time to shop proven programs

TMPAA’s Thompson, Siefert discuss today’s program business opportunities and program administrators’ evolution

Despite soft market conditions, program carriers are less than enthusiastic about jumping at the chance to start a new program, according to two industry experts. But times may be ripe for a program manager who is less than pleased with an existing program’s coverages, pricing or processing, to market an established book of program business to another competing carrier.

The Target Markets Program Administrators Association provides a place for program partners–insurers, program managers and vendors–looking for options. And if you’re in the program business, TMPAA, is the place to be “period,” says Greg Thompson, chairman and CEO of Thomco who also serves as president-elect of TMPAA.

Art Siefert, president of U.S. Risk Underwriters, who also serves as CEO of The Lighthouse Companies and as been president of TMPAA, says that while carriers have a “renewed appetite” for programs, they still want something that’s up and established first.

In this exclusive interview with Insurance Journal’s Andrea Ortega-Wells, both Siefert and Thompson speak on the growth of the program market, why and how the role of a program administrator has changed, what program insurers are interested in writing today, and where the TMPAA–almost six years old–fits into the marketplace.

Can you describe the climate of the program marketplace today?
Art Siefert: Companies are more interested and have a renewed appetite in writing programs, but we are still at the stage where they would like to see the opportunity to move a program from one carrier to another carrier. As their first option, something that’s already up and established. It might be that the existing program manager isn’t happy with certain coverages, or pricing issues or processing issues, so they are looking at alternative markets to address specific issues with a current program. They [insurers] are the point where they are tip-toeing into brand new program opportunities provided that you can somehow aggregate a book of business and bring it to them, already aggregated, but with a plan that is concise in terms of how it gets from where it is now to $5 million or $10 million.

Greg Thompson: There has been a growth in the number of insurance carriers that will consider programs. That seems to be expanding rapidly.

How has the role of a program administrator evolved? What are the qualifications?
Siefert: It has become specialized to the point where it is a distinct way of distributing product. If you are a wholesale broker the main thing is to get the business placed. When you are a program administrator the goal is to produce profitable business to your carrier. It requires a lot more discipline from a risk selection and risk pricing standpoint, and it also forces you to take the position that there are times when you have to walk away. You have to have very sound underwriting practices in place. You have to hire and train skillful underwriters that can do proper risk selection and pricing and be very efficient in how you process business.

Thompson: Program administrators have become an efficient alternative to carriers which has made them more attractive. Program administrators have been around for a long time. We just didn’t call them program administrators. We called them MGAs (managing general agents), which was sometimes confusing because we are really not MGAs. We operate on a wider geographic territory, frequently nationally. And 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. As time has gone on, carriers have gotten more comfortable with the concept of the single program, or specialized MGA, or otherwise program administrators. Program administrators have made a lot of progress in terms of becoming more professional and better at their craft and as a result you’ve seen growth.

What types of programs are companies more interested in writing today?
Siefert: In general, they like stuff that’s nichey; stuff a general underwriting company, Travelers or Hartford, would not have in their underwriting box. They want stuff outside the box a little bit, where there is limited competition, only three to five markets pursuing that class of business. Then specific in that [niche] you find the kind of opportunity that also includes some anomaly in the marketplace. For instance, we are working on creating a program for various medical malpractice classes, and what we are looking for is a place where medical technology is ahead of the underwriting in that class of business. Let’s just say, perfusionist, where the technology has made that a much less severe class but the rates and the common understanding of that class is still one of severity. If we can find anomalies like that and take advantage of those anomalies I think those are the very attractive opportunities that companies are looking for.

Thompson: The top carriers in particular seem to be more casualty-oriented than property-oriented. Of course that’s been a function of the last two storm seasons, although property that’s not exposed to storms or cat losses can still be competitive. The focus seems to be, first and foremost that programs need to have a significant casualty bent to it. Secondarily, the smart carriers are looking for opportunities where there’s evolving industry, or you can fill a gap, and don’t have a lot of competition and can figure out a way to underwrite it profitably.

Why was it important to develop a Best Practices designation and have you seen increased interest since rolling it out?
Siefert: The reason a best practices designation was important to the Board was that it helps establish our credibility in the marketplace. Anything we could do that would establish the credibility of program managers was in the best interest of our membership. It’s the first step in establishing a baseline for professional program managers. We will have several new designees at our upcoming annual meeting in October.

Thompson: It’s our position that we will encourage the board members to also go through this process. We [Thomco] will definitely participate, probably later this year.

As the association enters its sixth year, where do you see it fitting into the market?
Thompson: I think it’s really become the association for program business, period. In the past there was not an association for people who do what we do. I feel that for what I do, the Target Markets Association is the perfect association for me. It was sorely needed. We were mixed in with other groups who did not have the same goals and the same business models.

Topics Carriers Underwriting Leadership Insurance Wholesale