Whereas there are many risk managers enjoying the services of third party administrators, there are some who have been disappointed by those administrators. When the third party administrators don’t match their roles, there are several problems which will arise such as higher insurance costs and claims, poor outcomes when it comes to claims, and even difficult problem identification and correction. This is why you need to find the right TPA for the successful delivery on their mandate. The risk manager should evaluate the third party administrator based on the company objectives and assign them roles which can be measured. The following are some of the factors you may have to consider when choosing a third party administrator.
You should go beyond the brand names. Most risk managers will opt for renowned companies because they have an established reputation across the board. Whereas this seems to be the best idea, there can still be mismatches between your organization and there’s. It is those mismatches that will lead to poor claims outcome, and generally higher costs. The relationships between the two organizations may also be ineffective as a result of such mismatches. Even if the brand has a perfect reputation, they may lack the right resources to handle the required tasks such as an information system that manages risks. Their priorities and culture may also differ from those in your own organization hence resulting into mismatches.
You should also articulate all your priorities to the third party administrators. The perfect relationship will start when both parties can spell out their priorities and the specific requirements for that particular enterprise. Issues such as unique risks in your industry, whether you have a national or local geographical footprint, and if the enterprise has a lot of complex claims. All these will help the TPAs to know what they are signing up for. If they don’t think they can deliver on those specifications, then they will tell you so that you can find someone who will. You can also enquire about the value of their information system that manages various risks, and its impact on your program. You will need to assess all your enterprise’s needs, come up with priorities, and ensure that request for proposals from the various third party administrators.
Finally, you should compare how close the third party administrator services match with your priorities. You should consider such issues as their geographical location, pricing structures, quality assurance, and even data handling. The type of transitioning and reporting should be equally looked at. Examining such issues will give you a rough idea on how well the TPAs will fit into your enterprise and help in achieving your objectives. You are supposed to stress on using result-oriented metrics to compare the various administrators. Instead of using processes to determine the fees charged, you should consider using the claim outcomes. There are several metrics which you can use apart from the fees charged. The type of adjusters the TPA intends to establish in your enterprise should be looked at as well.