The strategic TPA: From cost center to growth engine

By Peter Schiller

The biggest myth about third-party administrators? That they’re destined to be cost centers: necessary but interchangeable.

That mindset no longer holds.

As insurers face new growth pressures and rising consumer expectations, the role of the TPA is evolving. Forward-looking carriers are rethinking how they engage third-party partners. They are no longer simply seeking operational support. They are looking for strategic extensions of their own teams. In our experience, they want partners that can drive retention, add value to policyholder relationships and enhance long-term profitability.

This is why the idea of a strategic TPA is gaining traction. When built right, a truly modern TPA results in more than just reduced costs. Instead, it helps offset costs by driving revenue, increasing renewals, and retaining or even upselling existing customers at a fraction of the cost to acquire new ones.

Why TPAs can’t stay in the background

The traditional view of a TPA focuses on task execution: answer the phone, process the paperwork, stay out of the way. That mindset might keep operations running but misses the broader opportunity to create differentiated value.

A shift in hiring philosophy is often the first step. When TPAs staff solely for speed or volume, they limit their ability to handle complex or consultative scenarios. But when they hire licensed agents, policy experts and experienced advisors, they unlock a new kind of interaction—one rooted in trust, knowledge and service quality. These individuals can guide policyholders, assist in benefit plan design and become true allies to carriers navigating competitive markets.

This model is still emerging, but it’s gaining momentum. In the next decade, carriers who haven’t evolved their service models may find themselves losing business to those who have. Strategic TPAs are becoming the norm, not the exception.

Retention is a growth strategy

In life insurance, renewals are often the difference between a break-even policy and a profitable one. However, too often, the renewal experience is treated as an administrative afterthought.

This is a missed opportunity, especially considering that more than half of US adults are financially illiterate. Policyholders are actively looking to their insurance providers for education, reassurance and guidance. A TPA that can deliver that at scale adds significant value.

Some TPAs are capitalizing on this by developing more innovative and personalized renewal strategies. These include outreach campaigns that anticipate questions, educational touchpoints that reinforce the policy's value and follow-up efforts that ensure customers stay connected beyond the initial term.

Instead of treating renewals as routine administrative tasks, TPAs are positioning themselves as active contributors to a carrier’s top-line growth. And that reframe is changing how they’re valued.

Smarter workflows with AI’s assistance

While much has been said about automation in insurance, the most effective applications of artificial intelligence in TPA operations are assistive, not autonomous.

AI tools can help surface key policy details, summarize interactions and suggest compliant next steps. They improve speed, consistency and service quality.

This balance is critical. Consumers are increasingly skeptical of digital-only solutions, especially when trust is at stake. A hybrid approach, where AI supports human judgment, offers the best of both worlds: responsiveness and reassurance.

The strategic TPA is already here

Carriers today are under pressure to do more with less. Growth is still the goal, but not at the expense of compliance, customer satisfaction or operational discipline. That means every partner they work with must bring more to the table.

Next-generation TPAs are doing exactly that. They’re hiring with intent. They’re investing in training and oversight. They’re deploying technology that amplifies human impact. And they’re aligning themselves with carrier growth goals, not just operational service level agreements.

This model isn’t aspirational; it’s operational. And TPAs that embrace it aren’t just surviving in the modern insurance ecosystem. They’re shaping it.