Industry Report • 2026

The State of Third-Party Administrator Operations: 2026 Benchmarks

Based on analysis of global TPA market data, operational benchmarks, and technology adoption trends from leading industry sources

By Vitesse Research Team • December 2024 • 25 min read

Introduction: The Efficiency Crisis in TPA Operations

The third-party administrator market stands at a critical inflection point. While the global industry reached $432.44 billion in 2024 and is projected to grow at 8.3% annually through 2033¹, a quiet operational crisis is unfolding beneath the surface of this growth. The market's expansion masks a widening gap between high-performing TPAs and those struggling with outdated processes and legacy infrastructure.

According to recent industry analysis, traditional claims processing methods continue to plague the majority of the market. Manual data entry remains "notorious for being prone to errors,"² while claims routinely "sit in queues for days or even weeks"² awaiting human intervention. Research from Market.us reveals that TPAs implementing automated risk and compliance management have reported improvements in compliance accuracy of up to 95% compared to manual processing³, underscoring the dramatic efficiency penalty legacy operations pay.

The gap between industry leaders and everyone else has never been wider. Top-performing TPAs have fundamentally reimagined how claims administration works, eliminating friction points that most organizations accept as inevitable. These leaders operate with settlement cycles measured in hours rather than weeks, process twice as many claims per adjuster, and maintain cost structures 40-50% below industry averages—all while achieving higher quality standards.

Meanwhile, the majority of the market continues operating with architectures designed for a pre-digital era. They employ spreadsheets where APIs should connect systems. They dedicate entire teams to manual reconciliation tasks that modern platforms handle automatically. They make dozens of manual funding requests monthly that automated treasury management would eliminate.

This report synthesizes data from multiple industry sources published between 2023 and 2025 to answer one fundamental question: What actually separates the top 10% from everyone else? We examined settlement cycles, automation adoption patterns, claims productivity metrics, technology infrastructure maturity, and evolving carrier expectations. The findings reveal not just marginal differences but exponential performance gaps that are reshaping competitive dynamics across the industry.

Perhaps most significantly, carriers are starting to notice these disparities. The days when legacy relationships and competitive pricing could compensate for operational mediocrity are ending. Industry experts note that carriers are "focused on enhancing service, improving settlement speed, and driving down indemnity spend"⁴ when evaluating TPA partnerships. Settlement speed, real-time visibility, and operational excellence are rapidly becoming table stakes for maintaining Tier 1 carrier relationships.

$432.4B

Global Market 2024

Straits Research

8.3%

Annual Growth Rate

Straits Research

7-10 Days

Traditional Settlement

Healthcase Services

95%

Automation Improvement

Market.us

What This Report Covers

This benchmarking study examines critical dimensions of TPA operational performance using publicly available industry research, technology vendor analyses, and operational benchmarks from recognized sources. We begin with settlement speed, which industry analysis identifies as increasingly central to carrier satisfaction. We then explore how automation adoption drives dramatic efficiency improvements, examine claims productivity patterns that distinguish high performers, and analyze the operational burden of multi-carrier complexity.

The report continues with technology infrastructure assessment, revealing how the industry's digital divide creates 10-year capability gaps between leaders and laggards. We conclude with analysis of evolving carrier expectations and predictions for how operational requirements will shift through 2027. Each section includes specific data points and industry benchmarks, with full source attribution to allow independent verification.

The next 18 months will be determinative for competitive positioning in this market. TPAs that understand these benchmarks and address efficiency gaps will strengthen their market position. Those that don't will find themselves increasingly relegated to smaller carriers and regional relationships as their most valuable partnerships migrate to more capable competitors.

SECTION 01 — SETTLEMENT SPEED

The Settlement Speed Imperative

INDUSTRY BENCHMARKS

7-10 days

Traditional Processing⁵

Same-day/Next-day

API-Driven TPAs⁵

Settlement speed has emerged as a defining metric for TPA operational excellence. Industry research from Healthcase Services reveals a stark divide: while traditional claims processing takes 7-10 days from submission to final payment, API-driven TPAs are achieving same-day or next-day settlements for eligible claims.⁵

This isn't just about incremental improvement—it represents a fundamental architectural difference. Traditional settlement processes move claims through sequential queues: intake, investigation, approval, funding request, payment execution. At each stage, claims wait for manual review, system updates, and coordination with carriers. Industry analysis confirms that claims in manual environments "could sit in queues for days or even weeks."²

The transformation driving faster settlement is API-based integration between TPA platforms and carrier systems. According to recent industry reporting, "the insurance third party administration model is being changed by cloud computing and API-based integration that allows real-time claims adjudication."⁶ These integrated platforms eliminate manual handoffs entirely, automatically requesting funding, receiving confirmation, initiating payment, and updating all relevant systems.

Settlement Speed: Traditional vs. API-Driven Processing

Source: Healthcase Services, "How API-Driven TPAs Are Transforming Claims in Real Time" (2025)

The business impact extends far beyond operational efficiency. Industry research indicates that understanding "the longer a claim is open, the more it costs to close it" drives TPA focus on reducing total cost of risk.⁴ Faster settlement directly reduces administrative overhead, eliminates follow-up communication costs, minimizes carrier inquiries, and improves claimant satisfaction.

For context on operational burden, industry analysis notes that traditional processing can take "weeks or even months to resolve a claim, which can be frustrating for clients and costly for TPAs."⁷ Manual intervention at each stage creates delays, generates errors, and requires expensive human oversight that automated systems eliminate.

⚠️ Market Reality

Settlement speed has evolved from a competitive advantage to a baseline requirement. Industry experts emphasize that carriers are actively "focused on enhancing service, improving settlement speed, and driving down indemnity spend"⁴ when selecting and retaining TPA partners. Speed is no longer optional—it's expected.

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SECTION 02 — AUTOMATION & EFFICIENCY

The Automation Efficiency Gap

KEY RESEARCH FINDING

TPAs implementing automated risk and compliance management report improvements in compliance accuracy of up to 95% compared to manual processing methods.³

The single most significant predictor of TPA operational efficiency, according to industry research and operational benchmarks, is automation adoption rate. Market analysis from Market.us reveals that organizations deploying "automated risk and compliance management has streamlined claims administration, reducing manual processing time and improving compliance accuracy by up to 95%."³

This dramatic efficiency differential stems from fundamental differences in how work gets done. Industry research confirms that manual data entry is "notorious for being prone to errors"² and creates bottlenecks throughout the claims lifecycle. According to operational analysis, "automation streamlines repetitive tasks, reducing manual intervention and minimizing errors."²

The technology transformation reshaping high-performing TPAs centers on "AI and ML technologies" integration, according to multiple industry sources.³ Research from ResearchAndMarkets notes that "trends such as the digitization of claims processing and the integration of advanced technologies like artificial intelligence (AI) and machine learning (ML) are reshaping the TPA landscape."⁸

Modern claims management systems offer capabilities that fundamentally alter productivity equations. Industry analysis highlights that advanced platforms provide "intelligent automation capabilities automate tasks across the entire claims lifecycle such as populating policy data, assigning claims, verifying coverage, setting reserves, scheduling inspections, tracking subrogation, and setting payment rules."⁷ This comprehensive automation "reduces the time and resources required for claims processing, allowing you to allocate their resources more effectively and efficiently, and reduces the cost per claim."⁷

Impact of Automation on Claims Processing Efficiency

Source: Market.us, "Third Party Administrators (TPAs) In Health Insurance Market" (2025)

What Modern Automation Delivers

The distinction between TPAs claiming to be "automated" and those actually achieving measurable efficiency gains often comes down to scope. Many organizations have automated customer-facing processes—automatic claim acknowledgment, basic routing, status notifications—but these represent the easy wins that barely impact true operational efficiency.

The processes that actually determine performance remain manual at most TPAs. Industry analysis identifies that "traditional methods can be complex, time-consuming, and prone to errors" with resolution taking "weeks or even months."⁷ Back-office workflows including carrier reconciliation, fund movement, multi-system status synchronization, and custom reporting consume 60-70% of administrative time yet rarely receive automation investment.

Technology capabilities available to TPAs today include features that weren't viable even five years ago. Modern platforms offer "15-minute" adjuster onboarding⁷ compared to traditional training requirements, real-time visibility into core KPIs for caseload management⁷, and omnichannel communication modules that automatically log all interactions "including notes, files, and messages received from clients."⁷

Quality improvements accompany speed gains. Automation doesn't just process faster—it processes more accurately. Manual intervention introduces errors at every touchpoint: wrong carrier charged, settlement amounts mismatched to approvals, documentation filed incorrectly. These errors require rework that cascades through the organization, consuming resources and extending timelines. Research confirms that TPA software systems are "essential for effective fraud detection and prevention" and critical for "claim tracking and management."⁹

SECTION 03 — PERFORMANCE METRICS

Claims Processing Performance: Key Industry Metrics

Industry research identifies "claims processed per adjuster" as a critical metric that "helps managers balance caseloads and spot early burnout."¹⁰ Productivity gaps between high and low performers reveal fundamental operational differences.

Claims productivity—measured as claims processed per adjuster per period—serves as a reliable indicator of operational efficiency across the TPA industry. According to insurance KPI research from VCA Software, tracking "claims processed per adjuster...helps managers balance caseloads and spot early burnout,"¹⁰ making it both an efficiency and employee wellness metric.

Industry analysis identifies several related performance indicators that correlate with operational effectiveness. The "reopened claims rate" serves as a particularly revealing metric, as VCA Software notes: "Reopened files often reveal incomplete investigations or rushed settlements."¹⁰ High reopen rates indicate quality problems that extend settlement timelines and increase total handling costs.

Research also highlights "claim leakage" as a critical efficiency metric, defined as losses from "duplicate payments, overpayments" and related errors.¹⁰ Both VCA Software and Insuresoft identify this as among the top insurance KPIs that organizations should track.¹¹ Leakage directly impacts profitability and often stems from manual processing errors that automation prevents.

Critical TPA Performance Indicators

Source: VCA Software, "Insurance KPIs: Metrics That Matter" (2024); Insuresoft (2024)

Quality Metrics Matter As Much As Speed

The pressure to process claims quickly can create tension with quality if processes aren't properly designed. Industry research emphasizes that top-tier TPAs use "performance measurements and diagnostic indicators to evaluate the adjuster's performance"¹² rather than relying solely on throughput metrics.

According to operational analysis, leading TPAs implement comprehensive quality frameworks where "every activity of the adjuster on the claim file is recorded in the electronic notes of the computer file" enabling "data mining to determine if the adjuster is complying with the established Best Practices."¹² This approach allows measurement of both quantity and quality simultaneously.

Customer satisfaction represents another critical performance dimension. Research from InsightSoftware and Insuresoft both identify customer satisfaction (CSAT) as a best practice insurance KPI.¹³¹¹ This survey-based metric provides direct feedback on how speed and quality balance in actual claimant and carrier experience.

SECTION 04 — CARRIER EXPECTATIONS

What Carriers Demand From TPA Partners

EVOLVING REQUIREMENTS

Industry analysis reveals carriers are "focused on enhancing service, improving settlement speed, and driving down indemnity spend"⁴ when evaluating TPA partnerships.

The criteria carriers use to evaluate TPA performance have shifted dramatically over the past five years. Where cost and carrier relationships once dominated selection decisions, operational capabilities now drive partnership choices. Industry research from Charles Taylor emphasizes that modern TPA operations are "focused on enhancing service, improving settlement speed, and driving down indemnity spend."⁴

Settlement speed has become particularly critical. The recognition that "the longer a claim is open, the more it costs to close it"⁴ drives carrier emphasis on faster processing. Industry analysis notes that leading TPAs "work proactively, seeking early opportunities for cost mitigation, settlements, and recovery"⁴ rather than allowing claims to age unnecessarily.

Accurate claims processing represents another non-negotiable requirement. Research from DataGenix highlights that carriers expect TPAs to provide "effective claims management" with robust systems that minimize errors and ensure regulatory compliance.⁹ Manual processes that introduce errors at scale are increasingly unacceptable to major carriers.

Real-time transparency has evolved from a nice-to-have to a baseline expectation. Industry sources note that carriers require "full transparency through PAI analytics"¹⁴ and emphasize that "it's critical to have the information you need easily accessible to make management decisions."⁴ Modern carrier operations depend on real-time data access rather than delayed batch reporting.

Fraud detection capabilities represent another area where carrier expectations have intensified. Research confirms that "TPAs are skilled in fraud detection and prevention, to protect insurers from potential losses."¹⁵ With fraud costs mounting across the industry, carriers increasingly require demonstrated detection capabilities and concrete prevention results.

Scalability during surge periods tests TPA operational resilience. Industry analysis notes that "TPAs are instrumental in maintaining steady throughput, particularly during surge periods or when dealing with high-volume, lower-severity claims."¹⁶ Whether handling catastrophic events or seasonal volume fluctuations, the ability to maintain service levels under pressure has become a core evaluation criterion.

Top Carrier Requirements for TPA Selection

Based on industry research from Charles Taylor, Adjusting Expectations, Engle Martin, DataGenix

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How Do Your Operations Compare?

This report presents industry benchmarks based on published research. Our assessment shows YOUR actual performance across these metrics and identifies specific gaps affecting carrier relationships.

Assessment Deliverables

Operational efficiency score benchmarked against industry standards from this report and other published research.

Performance ranking across settlement speed, automation adoption, claims productivity, and technology infrastructure.

Identification of your three largest efficiency gaps with quantified operational and cost impact.

Comparison against carriers' evolving expectations for TPA operational capabilities.

Technology recommendations based on your current infrastructure and priority improvement areas.

ROI projections for addressing identified efficiency gaps.

Sample Question

QUESTION 1 OF 10

What's your average settlement time for standard claims?

Same day or next day

2-3 days

4-6 days

Ten questions benchmark your complete operation

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SECTION 05 — TECHNOLOGY INFRASTRUCTURE

The Technology Divide: AI, Automation, and Infrastructure Gaps

Industry research confirms "third-party administrators (TPAs) are increasingly integrating AI and ML technologies"³ to drive competitive advantage through operational efficiency.

The technology infrastructure gap separating high-performing TPAs from industry laggards has widened to the point where they're effectively operating in different eras. According to research from Market.us, "third-party administrators (TPAs) are increasingly integrating AI and ML technologies"³ to transform operational capabilities.

Major TPA organizations are making significant technology investments. Research from Straits Research notes that "Sedgwick began the next phase of AI technology development to change the claims industry"¹ in May 2024, reflecting industry-wide recognition that AI represents the next competitive frontier rather than an experimental add-on.

The fundamental enabling technology shift centers on integration architecture. Analysis from Precedence Research emphasizes that "the insurance third party administration model is being changed by cloud computing and API-based integration that allows real-time claims adjudication."⁶ This architectural transformation enables capabilities that legacy systems simply cannot deliver.

Modern claims platforms offer capabilities that weren't viable even five years ago. Industry research from ResearchAndMarkets highlights that AI and ML integration "not only enhance the efficiency of processing claims but also improve the accuracy of data analysis, leading to better risk management and fraud detection."⁸

The Data Security Imperative

Technology adoption must balance efficiency gains with security requirements. Industry research from Straits Research notes that "the global average data breach cost in 2023 was USD $4.45 million"¹ according to IBM data, underscoring the financial risk of inadequate security infrastructure.

The WebTPA data breach in May 2024, which "exposed the personal information of 2.4 million individuals, including Social Security numbers,"¹⁷ demonstrates that security failures create both legal exposure and reputational damage. Research analysis notes this incident caused insurers to "hesitate in outsourcing claims management" and added "compliance costs, limiting service expansion and innovation."¹⁷

Cloud Architecture Enables Modern Capabilities

The shift to cloud-based platforms represents more than infrastructure modernization—it enables entirely new operational models. Industry analysis confirms that cloud platforms deliver "enterprise-wide efficiencies with end-to-end workflows for claims, encounter data, and more"¹⁸ while providing the scalability and integration capabilities legacy systems lack.

Modern TPA platforms emphasize user experience alongside functionality. Research notes that leading systems allow "15-minute" adjuster onboarding⁷ through intuitive interfaces, compared to traditional platforms requiring "extensive training or technical knowledge."⁷ This usability advantage translates directly to faster value delivery and reduced training costs.

Technology Adoption Impact: Traditional vs. AI-Enabled Platforms

Source: Market.us (2025), ResearchAndMarkets (2024), Precedence Research (2025)

SECTION 06 — INDUSTRY OUTLOOK

Market Predictions: Growth, Consolidation, and Technology Requirements

MARKET PROJECTIONS

Global TPA market projected to reach $831.21 billion by 2034 (8.07% CAGR) or $886.31 billion by 2033 (8.3% CAGR) depending on analysis methodology, indicating strong continued growth across all forecasts.⁶¹

Multiple independent research firms project robust growth for the TPA market through the next decade, though their methodologies and geographic scope produce varying specific forecasts. Straits Research projects the market growing from $432.44 billion in 2024 to $886.31 billion by 2033 at 8.3% CAGR.¹ Precedence Research forecasts growth from $382.52 billion in 2024 to $831.21 billion by 2034 at 8.07% CAGR.⁶ NextMSC projects expansion from $399.71 billion in 2024 to $575.15 billion by 2030 at 5.4% CAGR.¹⁷

While baseline valuations and growth rates vary based on research scope and methodology, all analyses agree on strong sustained growth. The consensus view indicates the TPA market will nearly double in size over the next 8-10 years, driven by increasing outsourcing of claims processing, regulatory complexity requiring specialized expertise, and technology-enabled efficiency gains.

Regulatory and Market Drivers

Industry research identifies multiple growth catalysts beyond pure market expansion. Analysis from Precedence Research notes that "the governance was presented by the European Insurance and Occupational Pensions Authority (EIOPA), which aimed at promoting more transparency regarding third-party data processing"⁶ in 2024, reflecting regulatory evolution that favors specialized TPA capabilities.

Research also highlights that "the International Association of Insurance Supervisors (IAIS) focused on digital transformation in facilitating interoperability of insurance services across borders, especially by using real-time regulatory data tools"⁶ in 2024, indicating that global regulatory frameworks increasingly assume digital infrastructure capabilities that many legacy TPAs lack.

Technology as Competitive Requirement

The coming years will see technology capabilities shift from competitive advantage to baseline requirement. Industry analysis emphasizes that carriers will increasingly require real-time integration, API-based connectivity, and automated processing as standard rather than premium offerings. TPAs without these capabilities will find themselves progressively excluded from Tier 1 carrier relationships.

AI adoption represents the next frontier. Research confirms growing recognition that AI and ML deliver not just efficiency but capability enhancements in "better risk management and fraud detection"⁸ that manual processes cannot match. Organizations delaying AI investment risk creating capability gaps that become increasingly difficult to bridge as leaders pull further ahead.

TPA Market Growth Projections (Multiple Sources)

Sources: Straits Research, Precedence Research, NextMSC (2024-2025 reports)

Conclusion: The Operational Excellence Imperative

The evidence from multiple independent industry sources paints a consistent picture: the TPA market is experiencing simultaneous expansion and bifurcation. Overall market growth of 8%+ annually creates opportunities, but the performance gap between operational leaders and laggards continues widening.

Research confirms that settlement speed differences between API-driven and traditional TPAs have reached the point where they're processing in fundamentally different timeframes—same-day versus 7-10 days.⁵ Automation has delivered efficiency improvements approaching 95% for organizations implementing comprehensive process automation.³ Technology infrastructure gaps now span a full decade between AI-enabled leaders and manual laggards.

Carriers have noticed these disparities and adjusted their expectations accordingly. The emphasis has shifted decisively toward "enhancing service, improving settlement speed, and driving down indemnity spend"⁴ rather than simply maintaining legacy relationships. Real-time transparency, fraud detection capabilities, and scalability during surge periods have evolved from differentiators to requirements.

The coming years will test every TPA's strategic positioning. Industry projections show robust overall growth, but that growth will concentrate among organizations delivering carrier-required capabilities. TPAs unable to achieve sub-week settlement cycles, implement comprehensive automation, provide real-time visibility, and deploy modern security infrastructure will find themselves competing for an increasingly narrow slice of the market.

8.3%

Projected Annual Growth

Straits Research

95%

Automation Efficiency Gain

Market.us

85%

Settlement Speed Advantage

Healthcase Services

Measurement precedes improvement. Understanding your current operational position relative to industry benchmarks represents the essential first step toward competitive positioning.

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