Program Business

Welcome to the second edition of Insurance Journal’s 2021 Program Directory issue, published twice a year for agents and broker searching for available insurance markets and programs.

Program business is an area of the insurance industry that has experienced significant growth. According to the Target Markets Program Administrators Association’s State of Program Business Study released in October, the program business sector has grown from $17.5 billion in commercial insurance revenue in 2010 to $53.8 billion in 2020.

Program business is growing more quickly than the overall commercial insurance marketplace, the report said. While the size of program business rose 32.8% between 2018 and 2020, the growth in direct premiums earned for commercial lines increased by only 9.33% over the same period.

As with the rest of other industries, program business was hit by the COVID-19 pandemic. Program administrators reported lower growth in premiums administered and a slight decline in renewal rates in 2020, the report revealed. The number of program administrators that reported increases in premium declined from 81% in 2018 to 72% in 2020. The survey revealed average renewal rates went down from 84.5% in 2018 to 83% in 2020.

While a slightly lower percentage of administrators reported increases in gross program administration revenues, 71% in 2020 from 65% in 2019, the percentage of those reporting profit margins of more than 26% increased from 31% in 2019 to 41% in 2020.

According to the study, the pandemic had little impact on the program business in terms of productivity. Administrators and carriers both saw productivity improve as their employees worked from home, the report noted.

“It is important to note though that a greater percentage of carriers (45%) reported that productivity improved either a lot or dramatically,” the study said.

The study also showed rate increases for most lines of business were up in 2020, and nearly all of those firms responding to the survey believe rate increases will continue for the next two years.

Other highlights from the study:

• A greater number of carriers (53%) provided mid-term premium refunds in 2020 compared to 39% of administrators.
• More carrier respondents (43%) believe that social inflation is impacting rates. This compares to 33% of administrators surveyed.
• Cyber take-up rates showed a slight increase for both administrators and carriers.
• The estimated number of program administrators in the U.S. held steady at 1,000 despite active consolidation in the industry.

This is the eighth in a series of annual surveys of program administrators and carriers by TMPAA. The study reflects the views of 144 program administrators representing 1,041 programs and 51 insurers representing 1,322 programs. Research was conducted by the TMPAA and Advisen Ltd., a Zywave Company.