In the evolving world of Property & Casualty (P&C) insurance, Third-Party Administrators (TPAs) have emerged as indispensable partners. They play a pivotal role in helping insurers streamline claims handling, manage risk assessments, and deliver increasingly demanding customer expectations.
Yet, as TPA relationships grow in scale and complexity, many insurers find themselves struggling with fragmented oversight, inconsistent performance, and limited visibility – challenges that can compromise not just efficiency, but also the customer experience and regulatory compliance.
At Everest Group, we’ve observed that enterprises are shifting away from transactional outsourcing models and toward strategic partnerships built on transparency, accountability, and innovation.
A key enabler of this shift is a structured TPA evaluation framework that allows insurers to assess, monitor, and optimize their TPA engagements over time, as we discuss below.
Reach out to discuss this topic in depth.
The enterprise perspective: Common challenges with TPA engagements
Despite their critical role, TPAs can introduce operational risk, if not carefully evaluated and managed. Here are some of the most common pain points experienced by insurers:
1. Limited visibility and communication gaps
A recurring issue is the lack of real-time visibility into TPA-managed claims, leading to miscommunication and inefficiencies. For example, in a legal dispute, Zurich American Insurance alleged that its TPA partner failed to properly manage communication and record-keeping for claims, resulting in reputational risk and financial exposure
2. Inconsistent customer experience
Many insurers leverage multiple TPAs across regions or business lines, which can lead to varied claims handling approaches. This inconsistency affects brand perception and policyholder satisfaction – especially when claimants expect seamless, omnichannel engagement
3. Technology integration challenges
Insurers deploying modern core platforms (like Guidewire or Duck Creek) often struggle to integrate with TPAs that rely on legacy systems. This results in batch-processing inefficiencies, delayed updates, and reporting blind spots
4. Claims leakage and quality control issues
Claims leakage – the financial loss from inefficiencies or inaccuracies in claims handling – is a growing concern. Insurers often report discrepancies in loss adjusting practices, documentation quality, and fraud detection capabilities across their TPAs
In one notable instance, Sedgwick Claims Management Services faced class-action lawsuits alleging improper claims denials and delay tactics. Such incidents underscore the importance of robust quality assurance and performance monitoring protocols
5. Compliance and data security risks
TPAs handle sensitive customer data, which makes data protection and regulatory compliance non-negotiable. In 2023, Benefit Recovery Specialists Inc. (BRSI) – a major subrogation-focused TPA – experienced a significant data breach that exposed sensitive insurer-client information, triggering legal and reputational repercussions for multiple stakeholders
A strategic framework to evaluate and optimize TPA relationships
| Category | Criteria | What to assess |
| Operational capability & domain expertise | Claims Handling Expertise | Experience in specific P&C lines (auto, property, workers’ comp, liability, etc.) |
| Geographic Reach | Regional or national capability; catastrophe (CAT) handling support | |
| Specialized Lines Support | Capabilities in niche areas (cyber, environmental, construction, etc.) | |
| Scalability & Resource Model | Ability to handle volume spikes (e.g., post-disaster events) | |
| Technology & integration readiness | Platform Capabilities | Use of modern claims platforms (e.g., Guidewire, Duck Creek, proprietary systems) |
| System Interoperability | Integration with your core systems (Policy Admin, Billing, CRM) | |
| Real-time Reporting & Dashboards | Availability of customizable dashboards & analytics | |
| Cybersecurity & Data Privacy | Compliance with ISO, SOC 2, HIPAA, GDPR, etc. | |
| Customer experience & communication | FNOL & Claims Journey | Digital FNOL, omnichannel support, self-service options |
| Communication Cadence & Transparency | Regular status updates to policyholders, internal teams | |
| Multilingual & Accessibility Support | Call center support in multiple languages, accessibility compliance | |
| NPS/CSAT Tracking | TPA’s customer experience measurement and reporting process | |
| Performance management & SLA adherence | SLA Compliance History | Historical adherence to KPIs (cycle time, resolution rate, etc.) |
| Claims Leakage Mitigation | Controls to prevent overpayments, fraud, or errors | |
| Audit Readiness & Transparency | Willingness to be audited, quality assurance mechanisms | |
| Continuous Improvement Programs | Commitment to process optimization and innovation | |
| Regulatory & compliance alignment | Jurisdictional Compliance Knowledge | Awareness of state/federal laws and regulatory filings |
| Licensing & Certification Status | Active state licenses, adjuster certifications, etc. | |
| Documentation & Record-Keeping | Claims documentation standards for legal/regulatory defense | |
| Litigation Support | Support for legal defense, subrogation, expert testimony | |
| Relationship management & strategic fit | Cultural Fit & Alignment | Alignment on service values, policyholder experience focus |
| Governance Structure | Account management, escalation matrix, review cadence | |
| Flexibility in Contracting | Willingness to consider risk-sharing, performance-based pricing | |
| Innovation Mindset | Willingness to pilot AI, automation, and emerging tech |
From cost focus to value focus
Many insurers still rely on cost as the primary lens for TPA selection. However, leading insurers are now prioritizing value-centric evaluation models, emphasizing operational resilience, customer outcomes, and strategic alignment.
For instance, a leading North American carrier recently redesigned its TPA selection process using a weighted scorecard that incorporated Service Level Agreement (SLA) performance, claims analytics capabilities, and integration maturity – resulting in better alignment, reduced leakage, and faster claims cycle times.
A win-win for insurers and TPAs
This framework isn’t just for insurers – it’s also a strategic tool for TPA service providers looking to differentiate themselves in a crowded market. By understanding what insurers prioritize, TPAs can strengthen their offerings, improve client satisfaction, and build more enduring relationships.
As the P&C landscape continues to be shaped by technology disruption, regulatory shifts, and customer expectations, it’s time to reimagine TPA engagement models – not just as outsourcing, but as true partnerships.
If you found this blog interesting, check out our research on Life and Annuities (L&A) Insurance BPS and Third-Party Administrator (TPA) PEAK Matrix® Assessment 2025, which delves deeper into the Life and annuities TPA / BPS sourcing landscape. If you are ready to adopt the modern operating model powered by agentic AI and transition to Systems of Action (SOA) architecture, check our research on Systems of Action: Enabling Agentic Revolution in the Enterprise
If you are an organization planning or undergoing TPA services transformation or a provider enabling TPA services and would like to know more about what’s next in Insurance TPA, feel free to contact Abhimanyu Awasthi ([email protected]) and Ronak Doshi ([email protected]).
