In a business where specialization and differentiation areessential for growth, the program administration market is showingsteady year-over-year growth, according to the Target MarketsProgram Administrators Assn. (TMPAA)'s 2012 “State of ProgramBusiness Study.”

The study pegged the 2011 program administration market at $24.7billion in premiums, a 9 percent increase from $22.6 billion in 2010.

The TMPAA defines “program business” asinsurance products targeted to a particular niche market or class,generally representing a group of similar risks placed with onecarrier. Administration is done through on a wholesale or retailbasis by agent/broker program specialists with an expertise in agiven market, working with the carrier to provide underwritingselection, binding, issuing, billing, marketing, premiumcollections, data gathering, claims management/loss control andpossibly risk sharing.

Results were based on two surveys: one distributed to programadministrators, and a second to insurers that use the programdistribution channel.

Key findings include:

• There are roughly 950 program administrators in the U.S. About70 percent have fewer than 60 employees, and 30 percent have morethan 60 employees.
• Carriers and program administrators reported an estimated 2,000individual programs, a 5 percent increase over the 1,900 of lastyear.
• The average increase in premium volume reported by programadministrators was 9 percent, compared with 4 percent in 2010. Thelargest volume of premium was in government, non-profit andeducation, construction and transportation. Lowest volume was inretail, financial services and leisure.
• Top-ranked program insurers included Meadowbrook InsuranceGroup, Western World Programs, Great American Insurance, LibertyInternational Underwriters and Markel Programs.
• Average renewal rate reported by program administrators was 84percent, the same as last year.
• The mergers and acquisitions landscape is uneven: 43 percent ofrespondents say they want to purchase other administrators, whileonly 9 percent say they plan to sell. This sellers' market meansmultiples for program agencies may increase and, combined withhigher revenue and profitability, may change the dynamics of theM&A market.
• Technology plays a growing role in program administratorsuccess. About three-fourths of respondents have internal ITdepartments and most plan to invest in quoting and underwritingsystems.
• Underwriting profitability is a primary motivator. When askedto rate the factors crucial to program success on a scale of 1 to4, program administrators registered an average rating of 3.8 forunderwriting profitability, while insurers recorded an averagerating of 4 for this factor.

For the complete study, go to targetmarkets.com.