Program Administrators Target Specialized Risks

By | April 21, 2003

In today’s hard market, the value that a Program Administrator (PA) adds to the insurance transaction becomes especially clear. For the retail agent, they are a resource to be used in the placement of specialized or unique risks. Insurance carriers can also realize some significant benefits by partnering with a program specialist.

There are less than 1,000 Program Administrators nationwide. These specialists are serious about their area of expertise. How does this benefit retail agents? Let’s take a closer look at some of the characteristics that make them unique:

Expertise. Unlike most wholesale agents, PAs concentrate on specific target markets. Their audience can be identified by business classification, clearly discernable demographic characteristics or some combination of the two. In order to be successful, PAs must be aware of the unique risk exposures facing their target audience. They must also be cognizant of market externalities (changing technologies, governmental regulations, etc.) that may have an impact on their policyholders.

Commitment. Many program specialists capitalize on advances in computer hardware and software to make their internal workflow process more streamlined and efficient. Artificial intelligence built into rating engines can assist underwriters in evaluating risk. Scanning technologies allow for faster retrieval of policy forms. This computer sophistication translates into quicker turn-around time for quotes and policies.

A number of PAs have even migrated their systems capabilities on to the Internet. Many Web sites allow agents to secure premium indications in real-time, check on payment status, and communicate to program underwriters via e-mail. One note: the sites we’ve sampled required that the producer pre-register to gain access to this additional functionality.

Packaging. As specialists, PAs are very sensitive to the insurance needs of their niche market. Failure to make a “menu” of related products available to their clients may result in loss of market share. If a PA cannot secure the carrier appointments necessary to round out the portfolio, he/she may seek to partner with another Program Administrator. In either case, the result is the seamless availability of relevant insurance products for the client.

Carrier access. Program Administrators usually possess appointments with a select number of insurance carriers on a regional or nationwide basis. These carriers are chosen because of their stability and credibility in the marketplace. Recently, Target Markets (an association of Program Administrators) conducted a survey of 300 program specialists across the country. Their findings: nearly all respondents (91.7 percent) dealt only with carriers rated “A” or better by A.M. Best.

Individual retail agents have problems placing business through these insurance companies. Impediments may include a lengthy appointment process, minimum annual production thresholds, and minimum premiums on individual risks. Placing business through a Program Administrator allows the producer to circumvent these problems.

Marketing support. The PA is well aware of the risk exposures that most concern his/her target audience. Most have developed promotional brochures, sales aids, and other informational materials specifically designed to address these concerns. Retail agents can access the marketing tools to answer client questions, overcome objections, and compare coverage features.

Tough risks. PAs are sometimes faced with the “problem” submission that does not fit the underwriting parameters of their program. Rather than simply declining the risk, many specialists have sought alternative markets to handle one-off placements of the tougher accounts.

Insurance carriers also benefit from partnering with a Program Administrator. It is much more cost-effective to enter into a relationship with a single program specialist than to appoint numerous agencies across the country. Among the other advantages:

Information. Carriers can obtain a wealth of demographic and underwriting data through the management reports available through the PA’s processing systems.

A “finger on the pulse” of the target audience. Daily exposure to the marketplace allows the program specialist to quickly identify changing market conditions, increased risk exposures, and new business opportunities.

A kindred spirit. The livelihood of a Program Administrator is dependent on the underwriting authorities it receives from its carriers. These agents will take great care to manage the performance of their books of business.

Glenn W. Clark is the president of Rockwood Program Inc, a program administrator located in Wilmington, Del. Clark also launched Target Markets, a nationwide association of Program Administrators.

Topics Carriers Agencies

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Insurance Journal Magazine April 21, 2003
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