Traditionally, German insurers have been cautious when it comes to outsourcing to TPAs, as many see claims handling as their core competence. However, a shortage of experts and increase in complex claims has led to an increase in demand for trusted claims outsourcing partners.

This, in turn, has led to questions surrounding data protection, particularly sensitive personal data in the case of life insurance and disability claims handling. The complexities around data protection and outsourcing of claims cannot be an afterthought, but if proactively addressed by experienced teams, can be properly accounted for and – crucially – audited and proven.

With these evolving dynamics in the market, we are beginning to see early indications of a shift in mindset. The TPA model is gaining acceptance as a strategic tool for insurers, and a growing number of insurers are opening up dialogues around the possibilities of TPA support in the year ahead, with a focus on scrutinising the expertise and experience of potential TPA support teams.

The Changing Face of TPA in Germany

The global insurance TPA market has been on a steady upward trajectory, with a size valued at $324.9 billion in 2022, projected to reach an impressive $795.1 billion by 2032, growing at a remarkable CAGR of 9.6% from 2023 to 2032. TPAs have emerged as licensed third-party entities that offer administrative solutions to the market, particularly in the complex areas of disability claims handling and life insurance, as well as employment insurance. They act as intermediaries between insurance companies and policyholders, streamlining processes such as cashless claims and reimbursement claims, ensuring effective settlements, among other functions.

A surge in claims can lead to a surge in work for insurers, sometimes at the expense of service quality. TPAs have risen to address this issue by assisting insurers in providing seamless claim settlements and scrutinising complex claims for accuracy. They play a vital role in processing claims, providing a more efficient and customer-friendly experience.

So, what is driving this shift in Germany’s TPA landscape, and why are insurers now considering the outsourcing model more seriously?

The main reason for outsourcing is the shortage of experts, and this is particularly true in the disability claims handling market where cases can be very complex, and experts are few. The challenges are different for the various insurers; large insurers naturally have technical support and experts in-house, however when complex claims volumes rise, the number of experts is often simply not sufficient and external help is needed.

For large insurers, TPA support during work peaks as well as maternity and holiday cover also plays a major role. Small insurers, on the other hand, often require less technical support. Here, the loss of one expert (if the business only has four on-house complex claims specialists, for example) can already mean a 25% loss of productivity.

Many very small insurers can no longer sustainably maintain their expertise and need external support. In addition, demographic change is exacerbating the situation, with a loss of experienced talent in the market through retirement over the coming five years, and a lack of incoming claims experts to replace them.

Data Protection and Expertise

At the same time, German insurers – as with entities across Europe and the UK – have long been concerned about data protection and the expertise available with outsourcing to TPAs. Data privacy regulations, most notably the General Data Protection Regulation (GDPR), have added complexity to data handling and sharing. The sensitivity surrounding personal data – particularly health and disability data – has understandably made insurers cautious about sharing such information with external parties.

However, market-leading TPA providers have recognised these concerns and have invested heavily in robust data security measures and compliance protocols. They understand the importance of maintaining data confidentiality, and many have obtained certifications and expertise to handle data in full compliance with regulatory standards.

Furthermore, the availability of experts with a proven track record in insurance, who thoroughly comprehend the challenges around data privacy, confidentiality, and trust, has improved. This has instilled confidence in insurers, as they can now partner with TPAs who have the requisite knowledge and experience to handle their unique demands.

Partnership Approach

A partnership approach is critical to the evolving TPA market in Germany. Best practice sees TPAs and insurers collaborate closely to ensure that the TPA solutions align with the insurer’s specific needs and goals. Flexibility is inherent in the model – insurers seeking outsourcing support like this can decide the scope of the cooperation.
Complete outsourcing of claims management is possible, for instance, but so is outsourcing that leaves the decision-making power with the insurer. In this way, the insurer receives the support it needs, but does not lose its core expertise.

This flexible partnership mentality is gaining traction as both parties recognise the mutual benefits and efficiencies of working together harmoniously.

With TPAs acting as an extension of insurers, the shared responsibility for customer satisfaction and efficient claims processing leads to better outcomes for all stakeholders. This collaborative mindset fosters innovation and allows for more tailored solutions that can drive growth, agility, and efficiency, and also ensure momentum with claims handling does not wane at peak times.

A Look at Other Markets

To understand the full potential of the TPA model, it’s instructive to examine more mature TPA outsourcing markets, such as the United Kingdom and the Netherlands. In these regions, the TPA model has already proven its worth – helping insurers grow faster, become more agile, and operate with greater efficiency.

The adoption of TPAs in these markets has been instrumental in streamlining claims processing, reducing costs, and improving overall service quality. Insurers in the UK and the Netherlands have benefited from the expertise and capabilities that TPAs bring to the table, allowing them to focus on core functions and strategic growth.

TPAs: Empowering Growth in 2024

During 2024, the TPA market in Germany is poised for growth. In a market where in-house resources are often stretched, the maturing TPA model, with a focus on data protection, expertise, and partnership, is set to drive efficiencies and enhance the customer experience for insurers and policyholders alike, particularly at peak times for claims.

The lessons learned from more established markets can also ensure that Germany’s insurers adopt best practice with TPA outsourcing from the get-go. It is a transformation that promises to empower a new era of growth and efficiency for the industry in Germany,and the Pro Global team is on standby to support.

This article was originally published in The European Financial Review and is shared with the kind permission of the publication. Read the original here

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‘AI’ was named Collins Word of the Year 2023 – a fact that will come as little surprise to many. Considered to be the next great technological revolution, approximately 77% of global devices are already infused with AI technology. And the global AI market is poised for transformational growth, expected to reach US$190.61 billion in value by 2025.

Looking ahead to 2030, and by then AI is forecasted to contribute a staggering US$15.7 trillion to the world’s GDP. This surge is mirrored in the prediction that by 2024, the world will witness a proliferation of 8.4 billion AI-powered digital voice assistant units, surpassing the global population. It is within this context that the insurance industry finds itself at the nexus of transformation.

Incorporating AI technology into the corporate fabric will be a key strategic step for many companies in 2024, and re/insurance is no exception – particularly if the sector wants to remain relevant to clients and business partners.

Challenges for Re/insurers in 2024

Nevertheless, despite real progress on many fronts, the insurance industry still carries too much cost and, in real terms, has been slow to innovate beyond product distribution – in particular personal lines (red telephone, internet, comparison websites) – with very little innovation in the core insurance product provided some 350 years ago which looks very similar to that being provided today.

The slow adoption of innovation is due in many cases to the fact that the high burden of regulation in re/insurance dictates a considered approach to change, and ultimately reinforces a somewhat traditional industry where the opportunity for unencumbered innovation at speed is not commonplace. Nevertheless, this absence of substantial change stands in stark contrast to the rapid pace of advancement in other industries.

Amidst this transformative wave, re/insurers face multifaceted challenges, many of which are long-standing. Mastering data to improve risk insight and pricing, streamlining processes, optimising costs, and enhancing customer experience stand as imperative objectives. The commitment to regulatory compliance and economic modelling is intertwined with fostering positive corporate cultures, and diversity and inclusion initiatives – recognising the intrinsic link between the two.

Legacy issues continue to impede progress. The slow and costly implementation of new technologies, reliance on outdated systems by traditional players, and the encroachment of nimble tech-savvy start-ups pose both a challenge and opportunity that demand strategic and focused responses.

The burden of legacy extends beyond technology to encompass operational inefficiencies. Brokers, for instance, grapple with the ongoing costs of managing accounts in run-off, aged funding, unallocated cash, and retaining knowledgeable staff. The complexity is compounded by outdated and incompatible legacy systems, necessitating costly maintenance or intricate transfers.

This is a feature that plays across the insurance industry and is the constant struggle of those players with long histories and substantive scale, where scale can be an enormous advantage but often a significant constraint if the forces of change require the ability to pivot at pace.

This in part has fuelled the structural shift to the growth in MGAs affording the more entrenched and larger incumbents the ability to secure market access, capability and a more agile and innovative test and learn mode of operation that is otherwise difficult to replicate. As the real transformative power of AI becomes mainstream, the industry will experience more dramatic shifts in the industry’s tectonic plates and as Darwin once said “it will not be the strongest that survive, nor the most intelligent, but those most adaptable to change”.

Solutions in the Digital Tapestry

Mastering the ability to adapt and change at pace will become the new frontier. And in this fast paced and ever changing world, trusted partners emerge as pivotal allies. Expert led technology enabling partners provide the industry with a pathway to integrate the latest technologies without necessitating full-scale enterprise-wide upgrades.

From underwriting and policy administration, specialist claims triaging and management, streamlining technology to bespoke AI-powered process automation – augmented by human experts – implementation timeframes and costs are decreasing. And, with the right partner, the navigation through this digital terrain becomes more manageable, focused and – ultimately – rewarding.

As Lloyd’s and the broader London Market look to harness the power of digital transformation, there is increasing recognition that a trusted partner who can provide high quality onshore delivery of the more complex operational work, provide an effective gateway to management of more transactional offshore support and wrap this with digital enablement, is a key enabler to transformative change.

This partnership construct not only affords an organisation the ability to adapt and adjust its operational effectiveness, it importantly allows an organisation to ‘Fuel its Focus’ on those aspects of its business that are competitive differentiators, generating growth and profit. Today, Pro has some 350 London Market practitioners in the UK and growing, and a further 100 internationally, that coupled with a scaling Digital Services practice offers clients – existing and new – an enabling partner in which it can place its trust not just today but as a bridge to the future.

An inherent component of the insurance market is the inevitably that it throws off legacy business, that quickly becomes the ‘unwanted child’, a distraction to the continuing business, but also necessitates focus if it is not to become value detracting.

Our team has first hand experience in descaling over US$3 billion in liabilities – and it is well-known that there is significant legacy business accumulating in the market with significant value to be unlocked through focussed and proactive management, again an area where a trusted partner can be a real ally.

In 2024, we are expecting a strong increase in demand from brokers and re/insurers seeking strategic solutions to address their legacy blocks of business, freeing up a combination of human capital and economic capital allowing their expert teams to focus on core business activities.

Growth for the MGA sector

At the same time, the Managing General Agent (MGA) structure continues to prove itself as a crucible for innovation in our sector, acting as a bridge between established re/insurers and cutting-edge technologies like AI and automation. We have seen significant growth in the MGA sector, evidenced by the growth in the number of MGAs we support and levels of gross written premium under management, a sector where existing MGAs and new ones coming to market are finding an attractive environment within which to thrive.

Pro’s multi-territorial platform supports incubation of new MGA start ups but also a growing shift towards facilities; supporting brokers, carriers and a growing interest from product providers looking to ‘vertically integrate’ insurance within their product provision. We see these trends accelerating in 2024, with ambitious underwriting teams seeking out platforms that will support compliant and sustainable growth into new territories and classes of business, while embracing available advances in technology to expedite value capture.

Insurance at a crossroads

As we head into 2024, the re/insurance sector finds itself at a crossroads of unprecedented challenges and opportunities – one it must face head-on in order to remain differentiated and relevant. Climate-related perils, the shift to green technologies, the evolving political and economic environment, coupled with the breadth and pace of change afforded by an ever more intelligent range of technologies, demand a re-evaluation of underwriting practices and delivery models.

Fostering diversity, embracing innovation, and fortifying resilience through change are non-negotiable. In the next 12 months, we anticipate a riveting ride where AI redefines intelligence, data steers decisions, and human innovation shapes the future of re/insurance. What will be the word of the year for 2024? If we act as we need to, then ‘Adaptability’ has to feature large in the insurance lexicon!

Finding talent is just one part of the equation. When Emily Lewis joined Pro Global in October 2020 – a time when the entire workforce was operating solely from home – it was clear the business had found a talented university graduate whose way of thinking brought fresh perspectives (note a first-class degree in Philosophy, Religion and Ethics at the University of Birmingham).

But being able to realise and nurture talent is what sets companies apart. In just over three years, Emily – who joined the business as an Assistant Technician – moved into Project Management, working on a key client, and is now readying herself for a fresh challenge in the new year – taking on the Business Development Representative role for Pro MGA Global Solutions. This is a great example of how people at Pro can move between business divisions and functions to further their career within the Group.

It’s a role Emily feels she is ready for in the next step of her fledgling career. “The required skill set isn’t dissimilar to what is needed of me now within project management, but it’s a step up in responsibility and it comes at an opportune time for me,” says Emily.

“Speaking to Danny Maleary (CEO of Pro MGA Global Solutions), he’s talked about a pathway for me with the MGA business, and has highlighted the need to bring the next generation through to provide new minds and new ways of thinking. It’s exciting to be part of an ambitious business.”

For Emily, the MGA sector will be a new one, but she believes the grounding she’s had in her first three years at Pro will stand her good stead, and references the support she’s received and will continue to receive from all her colleagues. She also works from the office up to three days a week now, something she wasn’t able to do when she joined the business due to the Covid-19 pandemic, and has found it enriching to be around her colleagues and feel the inclusive culture of the company.

With Emily, the Pro family has found, realised and nurtured a gem.