Two things you need to do for your MGA right now
Here's how MGAs can increase their speed-to-market and underwriting process in no time.
Despite the obstacles caused by the pandemic, new opportunities emerged for MGAs and programs business overall with their specialized underwriting knowledge, niche focus and agility to adapt to changing environments quicker. In addition, the programs business space is becoming even more attractive with new managing general agents (MGAs) coming into the market, as well as the rise of InsurTech MGAs bringing more customer-centric business models into the space and partnership opportunities between MGAs and carriers.
Generally, MGAs are agile organizations with an entrepreneurial mindset that creates a competitive advantage to grow and address changing customer needs. To keep this competitive advantage, they need to continuously address the challenges ahead of them. I picked two very important ones today:
1. Capacity placement
Most MGAs are increasingly concentrating on niche markets, and I think the days of offering standard products are limited. From many conversations I had with them, we can expect many new programs in the next 2-3 years. A key step to launch a program, after creating the business plan, is to find capacity because there is no go-to-market without it. This is when things start to get more difficult, especially after the pandemic and going through a hard-market environment.
Placing programs is a relationship business — and for a good reason, because for a carrier to give away the underwriting pen, a high level of trust has to be established. Besides that, unfortunately, it is full of manual and inefficient processes, which highly impacts the speed-to-market for MGAs in a negative way.
I think a natural next step for program placements is to maintain the relationship side of things and to create a digital platform for MGAs and carriers with an efficient and data-driven matching engine. This way MGAs will have easy access to the right carriers and increase their speed-to-market, while carriers focus on deals that matter for them based on their appetites, access new program opportunities and relieve their underwriters’ time to evaluate more programs.
2. Adapting the right technology
Digital transformation has been around for a while. Established MGAs addressed legacy issues and adapted some level of technology mainly for process improvement purposes. At the same time, we have seen more digital MGAs or InsurTechs entering the market, which are usually fully digital models. There are many aspects of digital transformation, and usually, you will not find one single vendor that has everything you need. It is necessary to connect with different vendors for underwriting automation, “smart” bordereaux management, data analytics, as well as policy admin, to create a roadmap for digital transformation.
If there is one thing that has the potential to transform every segment and every branch of programs space, it is the use of data. The exponential growth of available data, coupled with the rapid adoption of advanced analytical technologies such as machine learning and artificial intelligence, is accelerating MGAs’ ability to understand and quantify risks better (i.e. forecasting customer behavior, supporting the underwriting process, or forward-looking analytical data). It is about what one does with this data: combine it with additional information from third parties, add intelligence to gain insights from other different sources that are not initially related, uncover the butterfly effect, and be aware of when it really begins to show its power.
I am a strong believer in partnerships and leaving things to the experts; therefore, MGAs don’t need to do it alone; they just need to partner with data and data analytics companies to create a “smart underwriting” framework and transform their programs for the digital era — beyond basic process improvement technologies.
The first step is to get the program leaders to look at this space digitally and turn to automation. This can be creating digital experiences for the end customer or their broker network or adapting new platforms to gain speed-to-market and efficiency in their placement process. The second step is to start working with partners that will replace or work with existing systems to create a “smart underwriting” framework.
Despite these challenges and many others, I think that we have a great market opportunity for the MGAs that focus on specialized underwriting in niche segments and that have solid distribution channels.
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