Escape rooms? There’s insurance coverage for that
MGAs excel at being insurance specialists. Here are a few things to consider when building a successful niche practice.
With the exception of the readers of this publication, nobody’s comfortable with insurance. Take a martial arts instructor or Little League coach. They’re required to buy insurance to open a studio or start a team, and their biggest concern is that they’re wasting money on a policy that ultimately won’t cover them in an emergency. It makes sense that they need the help of an insurance specialist.
That’s where the MGA excels. For an MGA, finding the right specialty or niche can be like reading tea leaves; it’s not an exact science. Often, it’s easier to start by eliminating what you don’t want to do. For instance, you’d probably take a pass on a market where premiums would be too high for insureds to purchase coverage, the losses are substantial or carriers won’t support it.
Then, along comes a niche that can be insured profitably and there’s a need for it in the marketplace. Think back to the Little League coach who doesn’t know insurance; he needs help. That’s the reason MGAs plant their flag in niche industries: to help the average person make sense of their insurance.
For a niche to be successful, everyone in the value chain has to be satisfied that their requirements are being met. That goes for carriers, retail agents and insureds. Carriers need to know the MGA is making good underwriting decisions. They expect to receive meaningful data at underwriting, and transactions need to be secure. Retail agents need to feel confident that the MGA knows its niche inside and out; the last thing you want to do is to issue a policy that leaves the insured exposed. And, the insured needs an easy way to obtain a policy, backed by exceptional service. Sometimes those requirements can seem like they’re in opposition to each other.
It’s not always easy serving several stakeholders, but that’s the challenge an MGA should relish. If it gives you heartburn, you might want to seek your fortune elsewhere.
Making it easy to do business
Over time, we’ve learned that the more we listen and respond to what our agents need, the more successful we will become as an MGA. We teased out the problems our clients and insureds had and set out to solve them. One thing we quickly learned is that generating certificates was too complicated, as was adding an additional insured to a policy. Simple stuff, right? After all, you can close a mortgage without ever stepping into an office, so why does getting an insurance policy for a youth soccer team have to be so difficult?
We built American Specialty Express originally as an online platform for associations then realized that many people who are not a part of an association also need insurance, so we expanded it to individuals who aren’t part of an association to get insurance. The youth coach sitting at home can go online and buy insurance, get policy documents, certificates and waivers, even submit claims. The system is adaptable, allowing us to continually expand the number and type of changes a policyholder can make.
When building an online platform, MGAs should make it easy to modify coverages, endorsements and exclusions in the system. Also, find ways to simplify the application process by serving up only the pertinent questions. And consider how to eliminate manual underwriting steps by programming the machine to make the decisions.
Working with agents
Over the years, we’ve worked with a lot of agents and are constantly evolving in how we work and add value. Take, for example, coverage for a special event. Many agents will have this need arise at one point or another, and we’ve found there are two types of agents who need special events coverage: those who need an efficient system for a one-off risk, and those looking at small business as a revenue source.
The first example is the commercial agent with a client who has an upcoming one-time event. This agent doesn’t specialize in event coverage and simply wants to get it right and do it quickly. The second example is the small business or personal lines agent who needs a $500 special event policy. Speed is also important to them, and they use our online system frequently.
When an agent does repeat business with an MGA, the two parties get to know each other pretty well and it becomes easier for the MGA to make changes to improve the experience.
One thing they all have in common is they don’t want to fill out a six-page application. They just know they have a wedding coming up. We’ve stripped much of the policyholder info from the very front and pushed it later in the rating mechanism. We ask four things: state, type of event, number of guests and will alcohol be served. Our deliverable is to give them an estimated premium immediately. For example, coverage for a wedding in Michigan with 100 guests and no alcohol is $95. The goal is to give the agent a product and answer two questions: Is this competitive, and does it meet my client’s need?
There are times when the agent doesn’t need to get involved so consider building self-service options into your system. Usually, the certificate of insurance (COI) is the “golden ticket” the coach is after — to rent a gym for practice or enter tournaments. There’s no need to contact the agent to obtain a COI; the coach goes online and downloads the document in seconds. Of course, it’s important to be standing by to help with issues or questions. Sometimes human intervention is necessary to complete a transaction and convert a frustrating customer experience into an exceptional one.
Working with carriers
When I think of what carriers are looking for in a relationship, I think the two ‘Ds’ help an MGA stand out: data and distribution.
The MGA brings great value to the table in the form of data collected during the application process. If it specializes in a business or industry or type of coverage, it can be the most important source of information on insureds. Carriers like our data because we are constantly capturing new data about the people who need special events coverage. Everything an insured or agent submits to us is structured data, which we can use to analyze and adjust the contract language, terms and conditions, endorsements and exclusions, and rates. At the end of the day, the data we collect helps make critical, evidence-based decisions about how to underwrite a given specialty.
Much has been written about the future of small business in America, and notwithstanding the pandemic, it represents an ever-burgeoning market for insurance. Carriers realize that the niche MGA is an indispensable partner because the MGA has its finger on the pulse of that vertical or business category. Without the MGA, a carrier may not have the ability to source that business. Their marketing and distribution arm is the MGA, which is producing business on a daily basis. The MGA finds ways to write policies profitably, give carriers the data they need and do it at a fixed cost.
Is it InsurTech?
An MGA cannot write small business on a repeatable, sustainable basis without the right tools and technology. The sheer volume makes it impossible to do manually. Getting from manual underwriting to fully digitized sales is a journey, and during our evolution, we were thinking more about meeting the customer’s needs than about the software. We were involved in InsurTech and didn’t know it was InsurTech. Granted, there are a lot of InsurTechs doing amazing things, but we had success building all of our enterprise systems in-house.
When building or buying technology, my advice is to keep the customer top of mind, then make sure the technology is focused on a need a large number of clients have — like getting certificates and making changes to additional insureds, limits and coverages.
There are many things we don’t know, but we’re experts when it comes to sports, leisure and entertainment. We even have a program for escape rooms! It’s not everyone’s cup of tea, but it’s proof that there’s a stage for every MGA to star on.
Spencer Batt is executive vice president and chief marketing officer of American Specialty Insurance & Risk Services, a Brown & Brown company. The opinions expressed here are the author’s own.
Related: