Captives & Claims: How To Select a Third-Party Administrator (TPA) 

Introduction

I’ve worked in insurance claims for over 30 years.  I had read about captives while studying for insurance exams, but my first practical experience wasn’t until I joined Uber in 2014.  What an education that was!  I have been immersed in many captive programs over the last decade.  Programs have covered everything from workers compensation to home sharing to autonomous cars and trucks.  I offer some of my experience working with captives and Third Party Administrators (TPAs).

Choosing a TPA is an important step in setting up your captive insurance program.  An effective TPA program can bolster client satisfaction, financial performance, and operational efficiency.  Claims handling can also have a profound impact on your brand.  I’ll expand on some critical points when selecting a TPA. 

Is a TPA Necessary for a Captive Program?

The short answer is no.  Claims can be handled internally.  Many businesses see value in using TPAs.  Benefits include gaining a thought partner with superior claims expertise, accessing advanced claims technology, and ensuring regulatory compliance.  This collaboration can also allow you to dedicate more of your resources to the core competencies of your business.  For this article, let’s assume that you have evaluated internally and determined you want to use a TPA.

Do I Have to Use One TPA for all the Programs in my Captive?

Again, the short answer is no.  Each situation is different.  It’s obviously easier to manage one relationship.  A TPA that excels in cyber may not have the right commercial property footprint.  An exceptional commercial auto liability TPA may not have a Workers Compensation practice.  Weigh the benefits of specialized expertise against the effort of managing multiple vendor relationships. 

Key Considerations in Selecting a TPA

Financial and Operational Due Diligence

Before digging into how well a TPA aligns with your specific needs, conduct your due diligence. Consider asking TPA candidates for information including:

• Financials: This can help you assess the TPA’s financial health and stability.
• Independent Compliance Report: Many TPAs utilize third-party auditors to conduct System and Organization Controls (SOC) assessments of their internal controls.
• Proof of Insurance: Your TPA should be adequately insured to protect from risks associated with managing your captive program.  
• Litigation History: Ask for information about any past bankruptcies, lawsuits, or significant financial proceedings that could indicate risks to working with them.

Claims Operating Systems & Technology

Technology plays a significant role in effective claims management. The right TPA should offer technology that meets your captive’s needs. This can include:

• First Notice of Loss (FNOL): The TPA’s capabilities should match your program’s needs.  Make sure you start the claims journey on the right foot by asking the right questions.  Mobile friendly and/or online reporting may be essential for some programs.  Reporting by phone or email may be preferable for others.
• Operational metrics:  The prospective TPA’s platform should provide customizable reports of metrics that are important to you.  Identify these metrics and make sure your TPA’s system allows you to access this information in your preferred format.
• Robust external reporting: There may be multiple external customers requiring data from your TPA.  This can include excess insurers, and reinsurers.  The TPA’s system must be able to provide the right data to the right people at the right times.
• System Access: Some captive owners prefer a TPA that allows access to claim notes, updates, and workflows.  Others have their own systems and want the TPA to complete some or all claims functions within their system.  Determine your needs and make sure TPAs you are considering fit the bill.
• SMS/Text Communication: Consider if SMS/text communication is essential to your program.  This can be as simple as an outbound text setting the expectation of a phone call or a more extended interaction retained within the claim notes.
• Electronic Signature Options: The ability to execute electronic signatures can speed up some settlements and improve cycle time.

Interviewing the Claims Team

It’s great to talk with business development and account management folks, but you should also chat with people that will actually be handling your claims. Use these conversations to press for details and specific examples.  Cover things like:

• Their experience handling claims and programs that are similar to yours.  This can be especially important with specialized risks and captive programs.  There can be significant differences from handling claims for a traditional insurer.
• Their problem solving.  Talk about a coverage issue they encountered and overcame.
• Their collaboration style.  Captive insurance requires communication between the TPA and the captive manager.  Talk about a time they worked with the client to make a business decision.  

Checking References

Gathering feedback from clients in similar industries or captive structures helps you understand how well the TPA handles nuanced claims and complex risk profiles.  When speaking with references, ask detailed questions such as:

• How long have you worked with this TPA?
• What led you to choose this one over others?
• What specific challenges have they helped you overcome?
• Have they worked collaboratively to resolve complex coverage issues?

How XN Captive Helps with TPA Selection & Claims Administration

At XN Captive, we specialize in providing comprehensive captive management services, including claims administration consulting. Our team works closely with businesses to select and manage TPAs that align with your unique needs, ensuring optimal claims performance and regulatory compliance. From conducting due diligence to optimizing claims technology, we offer end-to-end solutions that enable you to make informed decisions about your captive’s claims administration

Contact XN Captive today for expert advice and support.

About Chris Boedeker

Chris Boedeker is Head of Claims for XN Captive. He began his insurance career in 1994 as a property field adjuster in Asheville, North Carolina. He ascended to national claims leadership roles at Mercury Insurance and Esurance. Chris joined Uber Technologies in 2014, building the claims team and leading it through a period of unprecedented growth. As SVP - Sharing Economy at Marsh and McLennan, he supported clients including Airbnb, Tesla, and Lyft. Chris joined Waymo in 2019 as Head of Claims and worked through challenges unique to autonomous technology. Chris currently lives in Phoenix. He is a graduate of Indiana University and has earned designations including Chartered Property Casualty Underwriter (CPCU), Associate in Claims (AIC) and Six Sigma Black Belt.