What a third party administrator does in the UK and US

That last distinction is the whole of it. Underwriters price and carry risk. Brokers place it. Loss adjusters investigate and quantify individual losses. A TPA runs the administrative machinery of claims, at volume, under someone else’s paper and to someone else’s rules.

What does a third party administrator actually do?

The scope is set by contract rather than by any standard job description, but the work usually covers most of the claim lifecycle.

Intake and first notification. Taking the notification, opening the file, checking the policy or scheme is in force and that the event falls within it.

Triage and reserving. Classifying the claim by type, severity and route, and setting the initial financial reserve that tells the risk carrier what the claim is expected to cost.

Investigation and case management. Gathering evidence, instructing suppliers such as adjusters, engineers, medical experts and solicitors, and taking decisions on liability and quantum within an agreed authority limit.

Payments and recoveries. Settling within authority, issuing payments from a client account or fund, and pursuing recoveries and subrogation.

Reporting. Bordereaux, reserve movements, settlement statistics and management information back to the risk carrier, which is often the deliverable the carrier values most.

Above a stated authority limit, the file goes back to the risk carrier for a decision. The limit, the reporting cycle and the service standards are the substance of the contract.

What does a TPA do that an insurer does not?

Nothing, in one sense: every activity a TPA performs is something an insurer could perform in house. The difference is structural rather than functional.

A TPA does not bear the risk. Claim costs fall on the insurer, the scheme, the fund or the self-insured employer. The TPA earns a fee, per claim, per head, per policy or as a percentage of premium or of claims paid.

A TPA works for whoever appoints it, which is not always an insurer. Self-insured employers, captives, mutuals, benefit schemes, managing general agents and Lloyd’s syndicates all appoint TPAs, and in those cases there may be no conventional insurer in the chain at all.

A TPA is usually built around throughput. Because it handles claims for several clients on shared infrastructure, its economics come from volume, standardised processes and system capacity. That is also why data feeds and file formats matter so much in TPA relationships.

A TPA can be changed. An insurer is a counterparty on a contract of insurance; an administrator is a supplier on a services contract, and can be replaced at the end of a term. This is why claims data portability is a live commercial issue in TPA arrangements, and why the question of who owns the claims records is normally addressed in the contract itself.

How is a TPA different from a loss adjuster?

The two roles overlap in practice and are distinct in law.

A loss adjuster investigates and quantifies a particular loss. The work is claim by claim and expert in character: attending the site, examining the damage, testing the cause, applying the policy to the facts and reporting on what is payable. Loss adjusters are typically instructed on individual claims, most often larger or more complex ones, and who appoints and pays them is the question that defines the role, as we set out in loss adjuster or loss assessor. The professional body in the United Kingdom is the Chartered Institute of Loss Adjusters, which under its Royal Charter “represents, promotes and safeguards professional standards in loss adjusting and assessing”.

A TPA administers a portfolio of claims end to end. It may instruct a loss adjuster as one of its suppliers on a particular file.

United Kingdom regulation draws the same line explicitly. Article 39B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 treats “expert appraisal”, “loss adjusting on behalf of a relevant insurer” and “managing claims on behalf of a relevant insurer” as three separate things, and excludes each of them from the regulated activity in article 39A of assisting in the administration and performance of a contract of insurance.

A third term is worth separating out. A loss assessor is not a loss adjuster. An assessor acts for the policyholder in presenting and negotiating a claim, rather than for the insurer, and in the United Kingdom claims management activity carried on for a claimant has been regulated by the Financial Conduct Authority since 1 April 2019 under its claims management regime.

How does the TPA model work in the United Kingdom?

Through delegated authority.

A UK insurer or Lloyd’s syndicate delegates defined claims handling powers to the TPA under a written agreement, commonly a binding authority or a delegated claims handling agreement. That agreement sets the classes of business, the settlement authority, the service standards, the reporting and audit rights and the complaints route.

Delegation does not move the regulatory obligation. Under the FCA’s Insurance Conduct of Business Sourcebook, an insurer must handle claims promptly and fairly, provide reasonable guidance to help a policyholder make a claim and appropriate information on its progress, not unreasonably reject a claim, and settle promptly once settlement terms are agreed. The principle behind that is stated plainly in the FCA Handbook and quoted in the regulator’s own factsheet on outsourcing claim activities: “a firm cannot contract out its regulatory obligations”. The FCA’s thematic review of delegated authority in the general insurance market, TR15/07, looked at how firms oversee arrangements of this kind in practice.

The permissions position follows from article 39B. Because managing claims on behalf of a relevant insurer is excluded from article 39A, a TPA acting purely for an insurer is not, by virtue of that activity alone, carrying on that regulated activity. The exclusion is drawn by reference to acting for the insurer, and the FCA’s Perimeter Guidance manual works through the distinctions. Whether any particular firm needs authorisation depends on the full range of what it does, and that is a question for the firm and its advisers.

How does the TPA model work in the United States?

Through state licensing, and around a much larger self-insured market.

TPAs in the United States are licensed or registered state by state rather than federally. The reference point is an NAIC guideline, Registration and Regulation of Third Party Administrators, guideline number 1090, and the NAIC maintains a state chart showing the statute, regulation or bulletin each jurisdiction has adopted. In the Fall 2024 chart only eight NAIC members are recorded as having no current activity, so a TPA operating nationally is dealing with a patchwork of statutes rather than one rulebook.

The clients are different too. American TPAs administer claims for self-funded employer health plans, self-insured workers’ compensation programmes, captives, risk retention groups and public entity pools, as well as for insurers. In a self-funded arrangement the employer or plan pays the claims from its own funds and buys administration, and often stop-loss cover, separately. The administrator processes and pays claims from the plan’s money under an administrative services agreement.

In workers’ compensation specifically, a TPA administering claims for a self-insured employer typically takes the notification, files the state first report of injury, manages medical treatment and indemnity payments, handles the interface with the state board, and reports back to the employer and its excess carrier. The federal recordkeeping obligation under 29 CFR part 1904 sits with the employer and is separate from the compensation claim, although the same facts usually feed both.

What are the main differences between the two models?

Three differences matter most to anyone selling into or buying from this channel.

Who appoints. The centre of gravity in the United Kingdom is the insurer, delegating authority under a binding agreement. In the United States a very large share of TPA work comes directly from self-insured employers and plan sponsors.

How the firm is regulated. The United Kingdom controls the activity mainly through the authorised insurer’s own obligations and its oversight of the outsourcing. The United States licenses the administrator itself, state by state.

What the record has to do. In the United States the administrator is usually filing into a statutory system, most obviously the state first report of injury, and the filing has a prescribed form and deadline. In the United Kingdom the administrator is usually working towards a pre-action protocol timetable and an eventual disclosure exercise rather than a statutory filing.

What does a TPA need from the client’s own records?

The same things, in both countries: a notification that arrives quickly, a record of the underlying event that is complete enough to triage without a second conversation, and the ability to retrieve that record again later without a manual search.

A TPA’s cost base is time per file, and time per file is driven largely by how much chasing the first notification requires. This is why administration agreements increasingly specify data formats, minimum field sets and transfer methods rather than leaving notification to free text, and why the quality of an organisation’s own incident records shows up in a claims relationship long before it shows up in a courtroom.

Frequently asked questions

Sources

• Financial Conduct Authority Handbook, ICOBS 8.1, Insurers: claims handling rules: https://www.handbook.fca.org.uk/handbook/ICOBS/8/1.html
• Financial Conduct Authority, TR15/07, Delegated authority: Outsourcing in the general insurance market, 2015: https://www.fca.org.uk/publication/thematic-reviews/tr15-07.pdf
• The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), article 39B, Claims management on behalf of an insurer etc: https://www.legislation.gov.uk/uksi/2001/544/article/39B
• Financial Conduct Authority Handbook, PERG 5, Guidance on insurance distribution activities: https://www.handbook.fca.org.uk/handbook/PERG/5/
• Financial Conduct Authority, Claims management companies: our regulation: https://www.fca.org.uk/firms/claims-management-regulation
• Financial Conduct Authority, Factsheet No. 031, Outsourcing claim activities to private investigators, quoting SYSC 3.2.4G: https://www.fca.org.uk/publication/other/factsheet-031.pdf
• Chartered Institute of Loss Adjusters: https://cila.co.uk/about-us/who-are-we/
• National Association of Insurance Commissioners, Registration and Regulation of Third Party Administrators (TPAs), guideline 1090, state chart, Fall 2024: https://content.naic.org/sites/default/files/model-law-state-page-1090.pdf
• Occupational Safety and Health Administration, 29 CFR part 1904, Recording and reporting occupational injuries and illnesses: https://www.osha.gov/laws-regs/regulations/standardnumber/1904

Last reviewed: 16 September 2026

About Logincident. Logincident is a data and software company whose configurable platform captures structured evidence at source through a mobile app, forms, photographs, GPS and offline capture, and presents it in dashboards and reports. We are not a law firm or a claims handler, and nothing on this page is legal advice.