Claims

Claims Software vs Outsourcing to a TPA

ClaimsGateway

21 Oct 26

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min read

Outsource claims to a TPA when you lack the people, the scale or the specialist skills to run them well. Run claims in-house on a claims platform when the claims experience is part of your product and you want control of decisions and data. Many insurers and self-insurers do both. Regulatory accountability stays with you either way.

Key takeaways

Outsourcing buys people, expertise and capacity. In-house software buys control, data and a consistent customer experience.
According to Norton Rose Fulbright, CPS 230 requires insurers to classify claims management providers as material service providers by default.
According to ASIC, handling and settling insurance claims has been a financial service needing an AFS licence since 1 January 2022.
Accountability for claims outcomes stays with the insurer, whether its own staff or a TPA handles the claim.
According to AFCA, general insurance complaints reached 36,022 in 2025-26, with delay the most common issue.

What is the short answer?

Outsource when you do not have, and do not want to build, a claims team of the right size and skill. Keep claims in-house when how claims are handled is central to your brand, when you want to control every decision, or when your volumes justify your own team. The decision is about people and control first, and software second.

The two options are not opposites. A TPA is a claims team you rent, and it usually brings its own software. An in-house team needs a claims system of its own. So the real comparison is between renting a whole claims operation and building one, with a platform at its centre.

A third route is common. Many organisations keep core classes in-house and outsource specialist lines, overflow or catastrophe surges. That hybrid is covered below.

When is outsourcing to a TPA the better choice?

Outsourcing to a TPA is the better choice when an organisation lacks claims staff, specialist skills or the volume to justify its own team. A TPA brings trained handlers, established processes, supplier networks and surge capacity from day one. For a new insurer, a self-insurer with few claims or a line needing rare expertise, that is hard to build.

Speed to capability is the first advantage. A TPA can start handling claims as soon as the contract is signed, because its people and processes already exist. Building an in-house team means recruiting, training and setting up a system before the first claim is paid.

Specialist expertise is the second. Some lines, such as workers' compensation, complex liability or marine, need handlers with deep experience that a smaller organisation cannot keep busy full time. A TPA spreads that expertise across many clients.

Surge capacity is the third. After a storm or flood, claims arrive in thousands within days. A TPA that serves many clients can move people to the surge. An in-house team sized for an ordinary month, by contrast, may be swamped.

The cost model can suit smaller books as well. A TPA usually charges per claim or as a percentage of claims value, so costs rise and fall with volume. For an organisation with unpredictable or low volumes, that can be cheaper than a fixed team.

When is running claims in-house the better choice?

Running claims in-house is the better choice when the claims experience is part of what customers buy, when the organisation wants direct control of every decision, or when volumes are large and steady enough to justify its own team. A claims platform then gives that team consistent processes, a full record and data the organisation owns.

Control of decisions is the main reason. In-house handlers apply the organisation's own judgement and tone, and leaders can change a process the same week a problem appears. With a TPA, changes go through a contract and an account manager.

Customer experience is closely linked. For a mutual, a specialist insurer or a self-insured employer, the way a claim is handled shapes how members or staff feel about the organisation. Keeping that in-house keeps it in the organisation's own hands.

Data ownership is the third reason. When claims run on the organisation's own platform, every claim record, decision and payment sits in its system. That data feeds pricing, underwriting and reporting without waiting for a TPA's extract.

A configurable claims platform makes the in-house route more practical. For example, ClaimsGateway (claimsgateway.com) covers the claim from first notice of loss to close, and its workflows are configured without developers, with changes owned by the business. The ClaimsGateway insurers page describes that approach.

What does regulation say about outsourcing claims?

Regulation does not stop an insurer outsourcing claims, but it keeps the insurer accountable. Under APRA's CPS 230, claims management is a default category of material service provider for insurers. The General Insurance Code of Practice binds service suppliers that handle claims for a subscribing insurer. ASIC requires an AFS licence for claims handling.

CPS 230 is the most significant change. According to Norton Rose Fulbright, insurers must at a minimum classify underwriting, claims management, insurance brokerage and reinsurance providers as material service providers. That brings due diligence, contract terms, monitoring and notification duties to every TPA arrangement. The CPS 230 claims guide covers what that involves.

The Code reaches TPAs through the insurer. A service supplier contracted to manage claims for a subscribing insurer works to the Code's claims rules, and under Part 5 it must tell the insurer about any Code breach within 2 business days. So the insurer needs reporting from its TPA that shows Code timeframes are being met.

Licensing adds a further layer. According to ASIC, handling and settling claims has been a financial service needing an AFS licence since 1 January 2022, and its guidance explains when claims managers acting for insurers need one. Either way, AFCA complaints about an outsourced claim are complaints about the insurer.

Can you combine outsourcing and in-house claims?

Yes, and many organisations do. A common hybrid keeps core classes in-house on the organisation's own claims platform, and outsources specialist lines, overflow or catastrophe surges to a TPA. Some go further and have the TPA work inside the organisation's platform, so every claim stays in one system.

The hybrid works best when the boundaries are clear. Each class or claim type should have one owner, one process and one place where its record lives. Otherwise, handovers between the in-house team and the TPA become a new source of delay.

Running a TPA inside the organisation's own platform solves the data problem. The organisation keeps one record of every claim, sets the workflow and sees performance directly, while the TPA supplies the people. Claims platforms that serve TPAs as a segment, including ClaimsGateway, can support that model. The TPA claims software list compares options built for that use.

How do in-house and outsourced claims compare side by side?

Side by side, in-house claims on a platform give control, data and consistency, at the cost of building and running a team. Outsourcing to a TPA gives people, expertise and capacity, at the cost of direct control. Accountability to regulators and claimants stays with the insurer in both cases.

Cost model. In-house, on a claims platform (for example ClaimsGateway): Platform subscription plus your own team; ClaimsGateway's is volume-based, from AUD 5,500 a year ex GST (October 2026); Outsourced to a TPA: Usually per claim or a share of claims value, set by contract.
Control of decisions. In-house, on a claims platform (for example ClaimsGateway): Your own handlers and your own rules; Outsourced to a TPA: The TPA's handlers, within authority and rules in the contract.
Customer experience. In-house, on a claims platform (for example ClaimsGateway): Set and changed by you; Outsourced to a TPA: Set by the TPA, to service levels in the contract.
Data ownership. In-house, on a claims platform (for example ClaimsGateway): Every claim record sits in your system; Outsourced to a TPA: Held in the TPA's system unless the contract or set-up says otherwise.
Process changes. In-house, on a claims platform (for example ClaimsGateway): Made by the business; ClaimsGateway workflows change without developers; Outsourced to a TPA: Agreed with the TPA, often through contract change.
Regulatory accountability. In-house, on a claims platform (for example ClaimsGateway): Yours; Outsourced to a TPA: Still yours; CPS 230 treats the TPA as a material service provider by default.
Scalability. In-house, on a claims platform (for example ClaimsGateway): Limited by your team's size; Outsourced to a TPA: Draws on the TPA's wider workforce.

Frequently asked questions

What does a claims TPA do?

A claims TPA, or third-party administrator, handles claims on behalf of an insurer, underwriting agency or self-insured organisation. It takes first notice of loss, investigates and assesses claims, manages suppliers, makes decisions within the authority it has been given and pays claims. The client stays responsible for the outcomes and the regulatory obligations.

Is outsourcing claims cheaper?

It depends on volume. For low or unpredictable volumes, a TPA's per-claim fees can be cheaper than employing a team. For large, steady volumes, an in-house team on a claims platform is often cheaper over time. The comparison should include oversight costs, because CPS 230 requires monitoring of material service providers.

Do outsourced claims count as a material service under CPS 230?

For APRA-regulated insurers, yes by default. CPS 230 requires insurers to classify claims management providers as material service providers at a minimum, unless they can justify otherwise. That brings due diligence, contractual, monitoring and notification obligations. Insurers should take advice on how the standard applies to their own arrangements.

Can a TPA use your claims software?

Yes. Some organisations ask their TPA to work inside the organisation's own claims platform, so every claim record, decision and payment stays in one system the organisation controls. This needs user and permission controls that separate the TPA's staff from internal teams, and a contract that sets out who owns which tasks.

What are claims management services?

Claims management services are outsourced claims handling provided by a service firm, such as a TPA or loss adjuster, rather than software. The firm supplies people and processes to manage claims for its client. Claims management software, by contrast, is the system a claims team, in-house or outsourced, uses to run the work.

About the author

ClaimsGateway builds cloud claims management software for insurers, underwriting agencies, brokers, TPAs and self-insured organisations in Australia and New Zealand. Every regulator figure in this article links to its source, and every vendor fact was checked on the vendor's own site on the date shown.