In Focus: What are the competitive advantages of MGAs for underwriting?

WE ASKED: What about the structure of MGAs allows them to be competitive in the underwriting market when providing insurance solutions?             

Mike Keating, chief executive, Managing General Agents’ Association 

MGAs are, by their nature, free of the legacy issues that most insurers face in terms of technology, process and – importantly – culture, enabling them to be nimble, dynamic and efficient.   

Being free of cumbersome and often unwieldy legacy systems enables MGAs to deploy state-of-the art systems across their businesses.  

This freedom brings a huge range of benefits – from greater speed to market to making fleet of foot product and rate changes.

It also eliminates a host of frictional and duplicate costs.

A major knock-on impact of modern technology and processes is the ability of MGAs to attract experienced and empowered underwriters, freed from time-consuming administrative tasks, who can focus on developing innovative new products and building close relationships with brokers and customers.

With the right technology and right processes in place, along with a major focus on collecting, analysing and understanding data – both their own and from specialist third parties – MGAs are able to make swift decisions and not leave brokers – and their clients – hanging.

All of these advantages in terms of technology, process and culture provide MGAs with a clear platform to focus on delivering underwriting returns, innovative solutions, exceptional service and broker and customer satisfaction.

No wonder then, that MGAs continue to flourish and attract capacity, enabling insurers to reach areas of the market they would otherwise struggle to serve.

Gary Head, director of schemes and delegated authorities, Axa UK 

MGAs provide a bespoke service that relies on their expertise and adaptability to deliver insurance solutions to customers for whom off-the-shelf products may not fit the bill.

Over the past five years, this area has seen significant and consistent growth, underpinned by the robust relationships MGAs and insurers have built to ensure they provide valued and effective products.

These relationships are key to ensure MGAs remain competitive and relevant in the marketplace.

 Axa UK has been in the schemes and delegated authorities market for more than 30 years and has seen many MGAs succeed – but also just as many fail.

Those who succeed focus on three key priorities – profit, people and product.

These priorities, coupled with building strong relationships with insurers and their customer base, have proved a consistently successful recipe and those who develop this focus have shown that they are built to prosper.

In our experience, not paying attention to fundamentals, such as observing minimum net rates and setting appropriate excess levels, can be the difference between success and failure.

To be competitive and profitable, MGAs need to partner with their carrier to fully understand and price the risk exposures facing their book of business.

Developing a deeper understanding of customers and of their risk profile is crucial.

Nick Wright, Chief Development Officer, Pen Underwriting

To be competitive in any industry requires a closeness to the customer – an understanding of what they need, when they need it and how to deliver it.

The structural characteristics of MGAs naturally lend themselves to maintaining that customer centricity – structure, specialism and service.

All of these factors interplay with each other.

Having the right company structure creates the ability for agility, for a nimbleness and adaptability, whether that is to market conditions or individual customer needs.

MGAs’ power lies in the ability to attract and retain experienced, entrepreneurial underwriting talent that wants nothing more than to keep doing what they do best – providing solutions – and empowering them to do just that.

This demands investment elsewhere – in pricing and analytics, sales and distribution and governance and claims.

But get that balance right and an MGA also delivers on its most crucial metric of sustainable success – delivering returns for their capacity partners.

On service, MGA size and specialism combine to help deliver the simple things well.

Saying no, quickly, to a broker can be as valuable as a yes. MGAs thrive on easily and quickly being able to invest in innovation and digitalisation that simplify the way insurance is transacted.

Ultimately, MGA competitiveness rests on their ability to provide an omni channel service and timely solutions in a world of rapidly evolving risk.