Third-Party Administrator Agreements
A third-party administrator agreement is a contract between two insurance underwriters and another company or business entity. The administrator must be licensed by a state's department of insurance and may be a corporation, partnership or sole proprietor.
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General Duties
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Third-party administrator agreements (TPAs) establish obligations for the administrator. The general duties of the TPA are to manage, review and investigate claims on behalf of the insurance underwriters. The TPA appoints adjusters and assessors to evaluate claims and seeks counsel to defend insurers.
Records
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Third-party administrator agreements stipulate procedures for handling records in written form and electronically. The TPA agrees to a provision within the agreement that the records remain under the ownership of the underwriters. Parties to the agreement include additional clauses prohibiting the TPA to place a lien against or secure interest in the records.
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Procedures
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Insurance underwriters permit TPAs to establish a system of procedures for handling and managing outstanding claims, claim reserves and other types of receivables payable to the underwriters. The third party administrator agreement includes a requirement making the TPA liable for mismanagement of records and noncompliance with regulatory authorities.
Loss Funds
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The TPA must establish a loss funds trust account to settle claims and offset expenses. The administrator agrees to provide an accounting record of loss funds upon termination of the third-party administrator agreement.
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References
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