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How Do You Effectively Manage A TPA? Speak Up And Be Active!

Become The Squeaky Wheel To Actively Manage TPA Outcomes

As claim practitioners, most of us are familiar with what to look for when we shop for a third-party claim administrator (“TPA”).  One recent discussion on this blog cited such elements as claims systems, data reporting capabilities, and quality control (6 Essential Elements When To Explore When Choosing A Third Party Administrator).  While such things are important, we often overlook one basic factor that is key to the success of our outsourcing venture: ownership of the TPA relationship. Here I’m not speaking in financial terms, but, rather, about a fully-dedicated partnering approach by the insurer or self-insured corporation to managing TPA performance.

During my career where I have managed and audited hundreds of unbundled claim programs, I have been frequently struck by the dearth of oversight exercised by insurers and corporation over TPAs.  Too often the attitude of the buyer of claims services is that it is the TPA’s problem if claims are not handled appropriately or losses are under-reserved. While such an arms-length approach may appeal from a contractual perspective, it does not fully consider the potential impact of TPA performance (or non-performance) on program profitability and relations with reinsurers, regulators, and other stakeholders for which the buyer remains responsible and ultimately bears the brunt for better or worse.

In my experience, the risk of sub-optimal TPA performance, and the resulting ills, declines with buyer oversight of the TPA.  Moreover, TPAs generally prefer to work with an insurer or self-insured that wants to work with them and remain involved in the claims process.  This enables the TPA to better understand and respond to client needs and requirements and is less likely to lead to unacceptable outcomes for the client and conflicts between the parties.

How to stay squeaky

With respect to individual claims, insurers and self-insureds should pro-actively provide feedback on the claim actions undertaken by the TPA, propose strategies for future claims handling, review case reserve adequacy, and ensure the TPA remains focused on claim disposal.  At a “big picture” level, TPA performance data should be periodically reviewed for consistency with claims service requirements, claims best practices, and financial goals.  Performance issues should be surfaced, and solutions identified and quickly put into action.

Getting the most from TPA relationships is just as much up to the buyer as it is the TPA. We can avoid the situations that lead to finger-pointing if we take responsibility and become an active business partner with our claim service providers.  This is just another example of the squeaky wheel getting the grease.

Posted in Best Practices.

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3 Responses

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  1. Nigel Shepherd says

    Well said Claire.

    AUDIT,AUDIT,AUDIT is the best way to manage a TPA. Auditing drives behavior;thus, to effective manage the TPA one must continuously audit their performance to ensure compliance with agreed upon guidelines.

    We should all keep in mind that both SOX and the FSA consider the responsibility of claims adjusting to be non-delegable duties. In other words, we are free to transfer the performance of claims adjusting but not the responsibility. Having said that, the carrier has an obligation/duty to continuously audit the performance of the TPA.

  2. Claire says

    Further to your comment, we get what we reward. When the TPA knows the client is actively involved in the claim process and expects world-class results, the TPA is more likely to produce them. Squeak, squeak, squeak.

  3. Marc Lanzkowsky says


    In further to yours below, please note that Claire is no longer with the The
    Claims SPOT as a contributor. Regardless, in answer to your question, there
    is no one template. Such TPA reviews are best tailored around the specific
    line of business and company needs. While there are standard items that
    should be reviewed (coverage, reserves, first notice, documentation) an
    absolute template does not exist.

    Our organization does work with carriers to develop audit guidelines and
    templates and to create an online method to allow auditors to track their
    reviews and easily produce audit reports.

    I would be happy to discuss this further with you at your convenience and
    and see how we may be able to assist.

    Marc Lanzkowsky
    editor and publisher

    Lanzko Consulting, inc.
    The Claims SPOT

    41 East 11th Street
    11th Floor
    New York, New York 10003
    O 888.721.1118
    F 888.720.7774
    C 516.640.2603

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