A Managing General Agent (MGA) manages all or part of the insurance life-cycle for an insurance carrier. This delivers multiple benefits to the carrier:
- Expertise: An MGA has in-depth expertise that insurers may not have and which can be costly to develop in-house. Insurers can pass on time-consuming and complicated tasks to an MGA that already has the knowledge to address them.
- Reduced risk. Insurers can reduce the risk of new markets by using the niche expertise of the MGA. An Insurer can grow more quickly by giving an MGA the authority to underwrite and issue polices for specialist lines of business.
- Expand geographic coverage. MGAs can give insurers geographic access to customers without the costs associated with opening an office.
- Speed and innovation. Many successful MGAs grow from an original entrepreneurial spark. They are by their nature quick to adapt to change and take advantage of new opportunities. This is demonstrated by their use of technology.
Technology and the MGA sector
Technology has two distinct influences in the rise of the MGA sector. One influence of new technology is the introduction of new risks which in themselves offer opportunities. In Emerging technologies – risk and opportunity, we examined the changing face of insurance. The MGA sector has proved capable of grasping the insurance opportunities posed by the risk of technology.
The other influence of new technology has been to improve the internal business models of many MGAs. This is certainly not universally true as more established MGAs have multiple, outdated legacy systems. Older systems make it difficult to react to changing market conditions, launch new products or reach new markets. So, investment in the right technology delivers differentiation in a crowded market place. As we pointed out in our blog What does the future hold for commercial insurance? the benefits are simple. These are cost reduction through efficiency savings, seamless delivery of products and services, and an enhanced user experience.
MGAs are a natural outlet for emerging technology solutions as they are typically smaller, more innovative and will embrace new opportunities more quickly than most insurers. This affinity with new technology from the MGA market was highlighted earlier this year, in an article MGAs see InsurTech as route to more customer-centric business models, In the piece, the Managing General Agents Association (MGAA) highlighted a change in attitude to technology from their members. Over 42% now feel InsurTech helps MGAs evolve their business model to be more customer-centric, a leap of over 20% on 2017.
The biggest challenge facing MGAs
There is an apt quote in Opinion: Tim Rourke on brokers and MGAs. According to Rourke from Willis Tower Watson
“A firm’s technological ability or agility within a specific niche cannot by itself be the panacea to securing a high and profitable market share”.
Neither expert knowledge or use of the best technology guarantee success in any market.
In my view, success for any MGA starts by winning trust from their insurance carrier. But winning trust is only the first step, it then has to be maintained and that means consistency. To maintain trust, the MGA has to perform consistently against the projected premium income and profit & loss projections, year after year. As all successful MGAs depend on a great and sustainable relationships with the Carriers, the biggest challenge therefore is having the right people in place.