Harnessing the power of MGA accelerators to move the industry forward
Discover how MGA accelerators are moving the industry forward and bringing new entrepreneurs into the industry.
As technologies develop and geopolitical complexities become more intricate, the need for specialized MGAs has only grown. MGAs write more business in specialty and emerging risk areas where traditional carriers either lack the appetite for the risk or don’t want to invest in building their in-house team of experts. At the same time, MGAs have been an enormous help to agents and brokers looking for markets for specialty, unconventional or other difficult-to-place risks.
Unfortunately, challenges continue to mount, presenting new and more complex obstacles to the growth of new specialty and traditional MGAs in our industry. Barriers to entry are discouraging entrepreneurs from bringing new MGAs to market. This is where MGA accelerators can add value by removing those barriers.
Challenges facing the market
We all felt it — 2022 was a volatile year. A turbulent property market shook the P&C space, global instability drove rampant inflation, weather events complicated risk, and supply chains and economic uncertainty had to be reckoned with. We predict little change in 2023. These conditions have only increased the difficulty of bringing new MGAs to market.
Like any new business, launching a new MGA can be a complex undertaking. Even the brightest, most entrepreneurial-minded underwriter will need start-up resources, including funding and continued capital infusions to support the resources required to launch and operate an MGA. Of course, current economic conditions have made capital scarce and therefore expensive, especially for startup MGAs with no track record or existing program for businesses to rely upon.
Economic and underwriting conditions have made carriers reluctant to take on new or additional risk, particularly from new distribution sources. Indeed, carriers that have not exited unprofitable lines of business have taken much of their underwriting back in-house, reducing the available capacity to new MGAs.
Insurtech companies and products have made it easier for many larger and more established MGAs to grow thanks to innovative platforms that support the underwriting, rate, quote and binding processes. However, many of these enhancements have proven to be out of reach for smaller MGA start-ups which typically lack the necessary years of experience, connections, capacity and capital to grow and compete.
Exploring MGA accelerators
An MGA accelerator can provide the necessary support, expertise and guidance need by those looking to start an MGA. Accelerators can be cost-effective and help entrepreneurial underwriters pursue their aspirations to launch their own MGAs without the need to immediately staff up for the various back-office support. Additionally, accelerators can assist with developing a business plan, securing capital, building out products and services, and launching and managing those products and services as well.
A good accelerator will provide underwriting, actuarial, operational and legal experts to guide the leadership of new MGA programs. They will provide mentoring and guidance, customized technology, access to funding resources, compliance expertise and more.
Additionally, an experienced MGA accelerator will help to ensure a new MGA is positioned to function and operate within the modern insurance industry in a way that is attractive to the carriers, agents and brokers they interact with. They’ll offer resources to help the MGA launch and develop relationships with carriers and reinsurers — relationships that might otherwise be difficult to establish or otherwise take years for new or emerging MGA business owners and operators to secure.
Further, accelerators can introduce MGA leaders to the latest technology to analyze data, streamline, speed up and enhance systems and processes from underwriting to claims. For example, some accelerators offer resources that can promise speed to market, increased automation for greater transparency, compliance adherence and more.
There is also a business operations benefit to consider when leveraging data to fuel growth. Following this model, most MGA accelerators will leverage data to guide aspiring MGAs toward sustainable profitability, both for the MGA owners as well as its capacity partners. However, special attention needs to be paid to underwriting fundamentals when leveraging this kind of guidance, as the focus in recent history has been on topline growth and distribution.
Finally, an accelerator can provide general business operations assistance for MGA entrepreneurs, including human resources, payroll and benefits support. Also, MGA accelerators are uniquely positioned as hubs of cost-saving technologies, allowing multiple MGAs to collectively access the latest technologies that may have otherwise been unobtainable.
The Insurance marketplace of the future
By leveraging the power of technology, and established relationships with capital, carriers and more, accelerators play a key role in helping to introduce potential MGA entrepreneurs to our industry.
The key to moving our industry forward in today’s challenging economic conditions and beyond can be found in fostering the advancement and proliferation of MGAs. Their ability to offer specialized underwriting, capacity and tailored product solutions will promise greater returns and growth for our industry. MGA accelerators will be the force that turns that key.
Lael Chappell is the chief marketing and business development officer at Desq.
Opinions expressed here are the author’s own.
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