Guy Carpenter & Company Inc., a global risk and reinsurance specialist and a part of the Marsh & McLennan Companies, has announced the results of its premier survey of domestic insurance companies that write a significant amount of program business through program administrators.
“The survey results suggest that carriers are actively seeking new business and the market appears ready to expand – provided that current rate levels are maintained and there is sufficient and reliable program information,” said the bulletin.
“This survey provides valuable insight into specialty program carriers’ expectations and requirements of their program administrators – it is our hope that by understanding these needs, participants in the specialty program marketplace will be able to work that much more efficiently and effectively,” stated Carl Bach, senior vice president and head of Guy Carpenter’s Program Manager Solutions Specialty Practice.
Other key report findings include:
— An evolving marketplace – The survey indicates the emergence of new markets, new program administrators and new products, increased merger and acquisition activity, a rising number and variety of third party service providers and the growing use of alternative risk mechanisms.
— A sizeable market segment – Nearly three-quarters (72 percent) of respondents estimate the specialty program marketplace to be $20 billion to $40 billion of annual gross written premium. Respondents comprised nearly half of that, reporting aggregate premium writings in excess of $10 billion at year-end 2004.
— Significant growth opportunities – Responding carriers project that they will write a total of 70 to 80 new programs in 2005, and 38 percent of the markets report that they see the market increasing during 2005.
— Diverse geographical preferences – The survey indicates that carriers are fairly evenly split in their preferences for national (30 percent), regional (40 percent) or single-state (30 percent) programs, and it appears that respondents’ geographical appetites are more of an underwriting decision than a licensing issue.
— Considerable outsourcing of services – More than 90 percent of responding markets indicated that they want program administrators to produce, rate, quote and bind business on their behalf, and over 75 percent also expect or allow program administrators to perform the underwriting function and issue and service policies. As carriers and their reinsurance partners increasingly push for alignment of interests among all underwriting parties, a number of markets require a level of risk sharing on behalf of the program administrators.
— Divided on claims administration – Given the importance of professional claims management on a profitable specialty program, respondents are split about using in-house claims departments instead of third party administrators (TPA). Slightly more respondents always use a TPA (40 percent), while 35 percent prefer the use of their own in-house claims department and 25 percent require the use of their in-house claims department.
The survey also provides an overview of issuing carriers, what they look for in program administrators, their claims administration requirements, how they monitor and control their business, how they buy reinsurance and their views of specialty program market conditions. For more information consult the company’s Web site at: www.guycarp.com.
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