There are new requirements to become a third party administrator in Maryland in 2019. With the passage of Senate Bill 22, third party administrators are now required to submit evidence of a surety bond with their application materials.
What is a Third Party Administrator?
According to the Maryland legislation, a third party administrator is “an individual or an organization that has control over premiums, contributions, and other cash flows for any period of time”. A third party administrator, or TPA, will partake in administrative activities including the creation and implementation of a business plan, improving claims management, reducing costs, and establishing customer relationships.
How to register as a third party administrator
TPAs are required to be registered with the Maryland Insurance Administration. Your application must include:
- Application Fee of $250
- Completed National Association of Insurance Commissioners (NAIC) Uniform Application
- Completed Maryland Insurance Administration Limited Lines Supplement
- A current surety bond in the amount determined by your Limited Lines Supplement
Once your application is completed, it may be submitted online with the National Insurance Producer Registry. If approved, you will receive a digital copy of your license within 10 days. The registration term for third party administrators is two years and must expire on June 30th. To renew your license, you must resubmit your application materials along with a payment of a renewal fee. If your license expires, it can be renewed as late as September 30th, however, the fee increases by $25 per month.
You can submit your Maryland third party administrator application online at www.nipr.com or send a paper application to:
The Maryland Insurance Administration
Attn: Producer Licensing
200 Saint Paul Place, Suite 2700
Baltimore, Maryland 21202
Why does a third party administrator need to be bonded?
The third party administrator bond is required by the Maryland Insurance Administration. Maryland Senate Bill 22, which becomes effective October 1, 2019, requires all TPAs to be bonded. This bond has been put in place to provide protection to the business in the event that the TPA commits fraud or acts dishonestly. If misconduct occurs, the TPA will be required to pay harmed individuals up to the amount of the bond.
How much does a Maryland third party administrator bond cost?
The cost of the third party administrator bond is determined at the time of the initial application or renewal, and the cost is determined by an underwriter who will review the qualifications of the applicant. The cost of a TPA bond is typically between 1-3% of the total bond amount for highly qualified applicants, and it increases for those deemed slightly less qualified. The bond amount is based on the average amount of money that is handled in the prior calendar year and the amount expected to be handled in the current year. This amount must be at least 10% of the average amount the TPA expects to handle at any one time, between $5,000 and $500,000. The bond amount can be determined by filling out the Limited Lines Supplement.
Ready to get your Maryland TPA bond?
If you need a Maryland third party administrator bond, the experts at SuretyBonds.com are here to help. Apply online or give us a call at 1 (800)308-4358 to get started today!