Sedgwick announced Monday that it has signed an agreement to purchase York Risk Services, continuing a long-term consolidation trend among third-party administrators.
The purchase of York — which must be approved by federal regulators — would mark Sedgwick’s third acquisition of a TPA in five years. The Memphis, Tennessee-based company purchased Cunningham Lindsey in 2018 and T&H Global Holdings, owner of VeriClaim, in 2014.
Sedgwick isn’t the only third-party administrator on a buying spree. Also on Monday, Fairfax Financial Holdings’ Riverstone subsidiary announced that it has acquired Rockville Risk Management Associates and its sister company, ER Quinn Co.
Sedgwick Group President Michael Arbour said during an interview that the purchase of York will enhance the company’s scope of services and improve its access to talent in the claims industry. He said York is active in some market segments where Sedgwick has little presence, such as with Longshore and Harbor Workers’ Compensation and Defense Base Act claims and the administration of group risk pools.
He noted that York also is in a strong position as a service provider for public agencies and provides managed care services for other claims administrators. Sedgwick also provides managed care services, but only to clients for whom it adjusts claims, he said.
“We’ve admired them as a friendly competitor for years,” Arbour said. “They do a lot of things that we do and they do a lot things that we don’t do.”
Joe Paduda, owner of the employer consulting firm Health Strategy Associates, said the merger of the two TPAs — both of which adjust workers’ compensation claims — is not surprising.
“There’s no question there will be more consolidation in the industry,” he said in an email. “Worker’s comp is a shrinking business and consolidation is a foregone conclusion.”
The acquisition of York happens to coincide with Sedgwick’s 50th anniversary. Chief Executive Officer David North called the purchase “another exciting milestone.”
York, based in Jersey City, New Jersey, has about 5,000 employees scattered among 60 U.S. offices. That will increase the size of the Sedgwick organization to a total of approximately 27,000 workers.
Arbour said Sedgwick hopes to keep all of York’s managers and workers on board, but details won’t be sorted out until after federal regulators complete an anti-trust review and the deal is finalized.
Riverstone’s purchase of Rockville and E.R. Quinn also broadens the buyer’s service offerings. The company, based in Manchester, New Hampshire, now focuses on legacy run-off insurance portfolios and provides claims resolution, reinsurance recovery and dispute-resolution services.
E.R. Quinn, located in Rockville Centre, New York, provides claims adjustment, trial preparation and private investigation solutions. Its sister company Rockville Risk Management Associates acts as a third-party administrator and provides loss portfolio consolidation, independent adjusting, subrogation and medical bill review services.
“This acquisition is a natural addition to RiverStone’s offerings and will accelerate our growth in the insurance services market,” stated Nick Bentley, president and chief executive officer of RiverStone.
Insurance claims administration is a growing industry. According to a report released by IBISWorld in February, revenues for third-party administrators and independent claims adjusting providers have grown 3.5% annually since 2019 and are estimated at $241 million this year. IBISWorld projected revenues of $261 million in 2024, an annual growth rate of 1.6% over the next five years.
“Primary insurers are expected to increasingly outsource claims to industry operators as medical costs continue to rise and weather-related losses trend upward due to global climate change,” the report states.
However, much of the TPA industry is connected to the health insurance market, according to IBISWorld. The percentage of U.S. residents without health insurance has increased since 2016, rising to 13.7% in late 2018 from 10.9%. A continued decline would threaten industry revenue growth, the report says.
On the other hand, at the same time demand is growing for data-driven risk management and advisory services.
“Larger operators have been able to use improved analytics and intelligence to offer clients a more diversified range of services,” IBISWorld said. “As a result, industry demand for skilled labor increased, and the number of industry employees grew at an annualized rate of 2.5% to 432,381 people over the five years to 2019.”
*This story appeared previously in our sister publication Claims Journal.