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The Evolving Role of Managing General Agencies

The managing general agency (MGA) market has nearly doubled in size since 2012, as a result of the accelerated growth of startups, expansions, and private investments across the industry. Naturally, this growth has been in step with the evolution and transformation of the insurance industry itself. MGAs have moved beyond typical or traditional functions to offer ever-increasing value to customers and businesses. Today, insurance companies turn to MGAs to expand capacity, geography, lines of business, and even to increase speed-to-market since MGAs take over many time-consuming policy processing and servicing functions.

This advancement has been a consequence of the intersection of technology and insurance. Insurtech has furthered not only the effectiveness of MGAs but also the productivity. And, while modern insurtech-enabled MGAs continue to compete on the same parameters as traditional counterparts, such as product, risk management services, delivery mechanisms, and price, this new breed offers one additional, critical advantage — flexibility.

Rapidly advancing MGAs

With mature, technologically advanced infrastructure, modern MGAs are often more agile, responsive, lean, and tech-forward than incumbents. These companies leverage new technology platforms to enhance operational efficiencies. Interestingly, insurance startups are looking towards MGAs as door openers to enter the market before becoming full-fledged primary insurers. That is because MGAs can now be set up easily and quickly, at far lower costs, and with straightforward regulatory requirements compared to traditional insurance operations. In fact, agile MGAs can often react much more quickly than an insurance company. That is because MGAs possess the expertise, technology, and means to expand rapidly to cater to a subset of the market.

Modern, technology-enabled MGAs can also sometimes offer better value by optimizing risk assessments, introducing smarter pricing, and even proactively acting to reduce the likelihood of loss. These benefits help drive more in-depth engagement with customers using lower prices, simple and efficient distribution channels, and painless paperwork, but also enhance the underwriting requirements using data-driven insights. All these features are quickly becoming the norm as startup MGAs leverage the power of synergetic technologies like artificial intelligence (AI), internet of things (IoT), analytics, blockchain, telematics, drones, and smart devices.

Reimagining the MGA

Given the impact that changing technologies have already had on the industry, going forward MGAs need to follow a “jack-of-all-trades” mindset by wearing many hats and leveraging multiple competencies.

  1. The Technologist: Driven by a focus on technology innovation for accelerated efficiency and productivity, these MGAs leverage tools like AI and machine learning (ML) to generate new analytic insights and modeling solutions. This approach allows MGAs to achieve faster speed-to-market and simplify complex commercial risks using a combination of expertise, experience, and technological supremacy.
  1. The Strategic Partner: These MGAs act as agents of collaboration and partnership with customers by proactively seeking out the right partners and connections necessary for business advancement. That allows for a widening array of products, specializations, and distribution channels which can be offered. Ultimately, this approach opens up new opportunities, with minimal risk, which can be seized to cross-sell products for an improved top-line.
  1. The Insights Leader: Insight-driven MGAs tackle business challenges by fundamentally altering the business foundations through the application of data. These firms operate with the precision of data scientists, striving to connect approach to application. With expertise in statistical modeling, underwriting modeling, risk evaluations, heuristic analysis, combinatorics, data visualizations, ethical analytics, transactional model development, and predictive analytics, these firms are connecting math to money. By imbibing the best practices and applications of data to develop business KRAs, like prospecting, sales, account retention, marketing, and servicing, the insights leaders category is also able to offer customized products with different rates, estimations, and risk assessments, based on specific customer data sets.
  1. The Knowledge Leader: The most valuable asset in any modern MGA firm is the talent base. And, in a world where rare talent is quick to jump ship if the offer is attractive enough, these players focus on discovering, hiring, and retaining the best minds. Such firms actively attract programmers, data scientists, and technologists. This approach allows for the enhancement and development of expertise within the organization, but also takes the lead in becoming the disruptor rather than the disrupted. For these MGAs, the need to stay ahead of the discovery curve is paramount and significant pride is derived from being pioneers in new potential areas of business innovation. 

Definition of a future-ready MGA

The 21st Century business landscape is one filled with disruption, competition from unexpected quarters, and innovation. To stay competitive, MGAs need to reimagine how business is done. Traditionally, the most significant challenge for most MGAs is managing fixed costs considering the business model’s dependence on dynamic premiums-based revenue. That poses a highly risky proposition for firms that start with high fixed costs. In such a scenario it would be easy to become trapped in a vicious cycle and feel the pressure to rush after higher premium revenues. That, in turn, leads to compromises in due diligence of underwriting standards which could jeopardize the business.

The only means to address this effectively is to transition from a capital-intensive model to an operational-intensive model consciously. That means that firms need to reallocate resources to move away from the traditional CAPEX model into a result-oriented OPEX model. By partnering with a solutions provider that offers a variable structure to OPEX, firms cannot only achieve certainty of costs but also meet high standards for underwriting discipline. Further, adopting the right technology solutions can help accelerate this change as it shifts the pressure from rigid capital investments to more flexible operational expenses.

If MGAs want to optimize workflows, streamline policy lifecycles, enhance operational efficiency, lower costs, and, most importantly, enhance customer experience, it is important to partner with technology service providers who can offer the right tools with a keen understanding of the core business. Through collaboration and partnership, modern MGAs can innovate and make progress towards the realization of full potential.

 

 

 


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