At its annual meeting in Scottsdale, Ariz., Oct. 29-31, Target Markets President Jeremy Hitzig and his successor David Springer will comingle with hundreds of administrators, insurers and vendors. Hitzig heads Distinguished Programs Group in New York City, which specializes in the real estate industry. Springer is president of Woodbridge, N.J.-based NIP Programs, a leading program administration firm. His term begins in January. Risk & Insurance® asked both of them about their goals for the conference and their take on how program administrators are perceived. The association counts approximately 60 carriers as members. Risk purchasing groups, website development and the outlook for the insurance market will be discussed at the conference.
Q: Mr. Hitzig, what do you consider your greatest accomplishment of your now concluding term?
Hitzig: I've been very honored to lead the association these last two years. Membership has increased dramatically as program administrators, insurance companies and key industry vendors respond to the valuable content and initiatives that the association continues to provide. While networking remains our top priority, the board, executive team and volunteer committees seek continuous feedback from our members and are exceptionally responsive. The association has become even more focused on helping peers share knowledge in a variety of ways from our first ever "town hall meetings" to ongoing workshops and a LinkedIn message board. But perhaps the most exciting development is that we are set to award the first Certified Program Leader (CPL) designations in October. This is the culmination of several years of substantial investment by the association in developing "Target University," an online resource providing tailored content by and for the program administration industry.
Q: Mr. Springer, what are your goals for your term that starts in January?
Springer: Historically, change leads to disruption and, ultimately, opportunity. I am developing a "listening tour" strategy to establish a direct line of communications between the Office of the President of Target Markets and many of the Carrier Practice Leaders that manage supply to our Program Administrator membership. This will better enable the association to stay at the leading edge of emerging issues that impact our membership uniquely and develop relevant programs that offer visibility into the conditions impacting our members more quickly.
Q: Please give me your "elevator speech" as to the benefits provided by program administrators to the brokers, carriers and insureds.
Hitzig: Program Administrators bring great value to the insurance industry through specialization. By focusing on the needs of specific industry groups, program administrators have the ability to understand the unique underwriting requirements, develop rates and forms, and determine the best distribution strategies to reach the target audience.Insurance companies can access profitable niches through partnering with skilled PA's, while brokers can find tailored solutions for their insureds.
Springer: Target Markets is where business gets done and professionals dedicated to the model can develop their skills cooperatively with their peers. There is no other association venue that delivers the same business value to its members, whether program administrator, carrier or vendor. This is most clearly evident in the membership and attendance numbers achieved over the past few years.
Q: What areas of risk or classification not generally thought of in terms of program administration should be ripe candidates for this area?
Hitzig: As the economy continues to shift, program administrators should be well-positioned to play a leading role in addressing the insurance needs of emerging industries or changing risk factors. For example, cyberliability and the growing "green" economy are both areas that are being successfully targeted by program administrators.
Springer: That is the beauty of the program business model -- so many types of businesses (new and old) have unique exposures that would benefit from a distinct program solution. Most commonly, we look toward emerging industries for new program development, such as rooftop farming in urban settings or alternative energy solutions, but existing businesses also have changing needs such as cyber liability or EPLI exposures in businesses that until now have been able to fly under the radar of plaintiff attorneys. Really, the only limit is your own imagination and desire.
Q: What is the greatest misconception when it comes to program administration?
Hitzig: Perhaps the greatest misconception about program administrators is that they aren't underwriters in the same sense as insurance companies. The majority of program administrators are both effective distributors and underwriters, with deep domain expertise and underwriting cultures. Many take risk alongside their insurance company partners, either through a captive insurance company or a sliding scale commission. Last year's groundbreaking "State of Program Business Study" developed by Target Markets showed perfect alignment in this regard with both insurance companies and program administrators citing "delivering an underwriting profit" as the single most important element to a successful program.
Springer: The most common misconception of program administrators is that we are not underwriters. Quite the contrary is true ? we are dedicated underwriters that are specialists in certain types of businesses. In many cases, program administrators have far more expertise related to risk selection, pricing and value added services, such as contract reviews and risk control for their specialty, than generalist carriers would be able to deliver to their clients in the same space. Combining sophisticated underwriting strategies with expert distribution is a powerful combination.
Q: How does the hardness or softness of the market impact program administration?
Hitzig: Program administrators generally feel the same cyclical effects as the rest of the industry. However, the industry and product specialization does create somewhat of a competitive advantage and provides some buffering in a soft market. In the aforementioned study, the results suggested that program administrators were actually outperforming the broader industry during the soft market.
Springer: Program administrators are not immune from the "normal" insurance market cycles. We are faced with a lot of the same capacity, pricing and terms changes that affect the rest of the market. What is different for us as opposed to a generalist is that we are managing focused books of business with the benefit of a great deal of detailed information about the classes of business we are underwriting. We gain insights from this data and combined with our unique understanding of the industries we are expert in, develop portfolio management strategies that enable program administrators to drive profitable underwriting results through all market cycles. The vast majority of program administrators take their duty to protect their carriers very seriously and are not afraid to trade volume for underwriting profit if needed.
Q: Are you satisfied with the number of carriers carrying program policies and, if not, what would you do to increase it?
Hitzig: Target Markets has approximately 60 insurance company members. This number has grown over the years with a mix of large and small, specialized and generalist companies. Part of the mission of TMPAA is to promote best practices in the industry. For example, the Best Practices Designation has been awarded to more than 20 TMPAA members, and as noted earlier, Target University will soon graduate the first group of Certified Program Leaders (CPLs). These types of initiatives will continue to build professionalism and promote the value of program administration, which ultimately will increase the number of insurance companies wishing to participate in this important segment."
Springer: What is the right number of carriers? There is no right number. As long as we do a great job of promoting the professionalism of our membership and our members continue to shine in the marketplace, high quality carrier members will seek to do business with them. We have about 60 carrier members now and the number has consistently grown over the years.
Q: Program administrators offer
a wide variety of services. Do you think that range should be on the lower or higher end for greatest success?
Springer: Every program serves a different type of risk with a different servicing need. There are significant benefits to business owners that take advantage of the specialized services often delivered by program administrators, and these services are often a key differentiator in the marketplace when a sophisticated business owner is making a buying decision. Whether the right amount of services is being delivered really is unique to each specialized program and the population of targeted buyers.
Interview conducted by Steve Tuckey, who has written on insurance issues for a decade for several national media outlets. He can be reached at email@example.com.
October 11, 2012
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