What is MGA Insurance – Digital Transformation of Managing General Agents

Piotr Biedacha
March 13, 2024

The MGA (Managing General Agent) Market grew by an astonishing 24% in 2022, amassing an associated premium volume of $85 billion.

The technology is changing so fast, that insurance companies struggle to keep up with insurtechs.

Revau (formerly GroupAssur) is being set as an example of a successful digital transformation, that took just 10 months and cut the submission process by 50%.

43% of the top 100 P&C insurance carriers (7 from the top 10), have one or more relationships with an MGA.

What is Managing General Agent (MGA)?

According to the definition by GFSC, MGA is "an Insurance Intermediary that has been granted underwriting authority by an Insurance Company. MGAs can, to an extent, select the risks and parties they are prepared to underwrite. MGAs can also perform other functions ordinarily handled by Insurance companies, like appointing distributors, underwriting, designing products and managing claims".

Beyond risk selection, MGAs are tasked with a suite of responsibilities typically reserved for insurance companies, including appointing retail agents, designing insurance products, underwriting, and settling claims. This multifaceted role underscores the MGA's integral position within the insurance distribution network, bridging the gap between insurance carriers and policyholders.

The MGA business model transcends the traditional scope of insurance agents. Unlike retail and independent agents, who primarily focus on selling insurance policies and administering them on behalf of insurance carriers, MGAs have the autonomy to underwrite and manage claims independently. This capacity for binding coverage is a testament to the trust and responsibility placed in MGAs by their insurance partners, allowing them a pivotal role in shaping the insurance products available to consumers.

Furthermore, MGAs occupy a unique niche when compared to insurance brokers, as insurance broker works on behalf of the policyholder. They do not possess the authority to underwrite or settle claims. In contrast, MGAs operate with a level of authority closer to that of insurance carriers, making crucial decisions on policy issuance and claims processing.

However, it's crucial to note that MGAs do not assume the ultimate financial risk associated with the insurance policy; this remains the domain of the insurance carriers themselves.

Despite their extensive capabilities, MGAs are distinct from an insurance carrier. They facilitate crucial aspects of insurance distribution, such as the design and underwriting of insurance products and the appointment of retail and wholesale brokers. This intermediary role enables MGAs to specialize in specific market segments, offering tailored solutions that meet the nuanced needs of both insurance carriers and policyholders. The MGA business model, characterized by deep collaboration with multiple carriers, leverages the expertise and authority granted by carriers to enhance the overall efficiency and effectiveness of insurance distribution, underwriting, and claims management processes.

Challenges for MGAs in the Insurance Industry

New Technologies Fueling MGA Growth

Managing General Agents (MGAs) are increasingly leveraging new technologies to fuel their growth and enhance operational efficiencies. The digital transformation within the insurance industry has led to the emergence of advanced tools and platforms that are redefining how MGAs operate, offering them unprecedented opportunities to improve their services and streamline their processes.

One of the most significant technological advancements impacting MGAs is the adoption of cloud-based solutions. These platforms offer a myriad of benefits, including the elimination of the need for physical data centers, access to cutting-edge technology, and a reduction in initial capital requirements. By moving to the cloud, MGAs can achieve greater scalability and flexibility, enabling them to quickly adapt to market changes and client needs without the burden of substantial upfront investments in IT infrastructure.

Furthermore, these technologies facilitate enhanced data analytics and risk assessment capabilities, allowing MGAs to make more informed decisions and offer tailored insurance solutions. The integration of artificial intelligence and machine learning algorithms into their systems can further refine their underwriting processes and claims management, leading to better risk management and customer satisfaction.

As the insurance landscape continues to evolve, MGAs that embrace these technological advancements will find themselves well-positioned to capitalize on new opportunities, differentiate themselves from the competition, and drive sustainable growth. This digital shift not only benefits MGAs but also enriches the overall ecosystem, delivering more efficient, responsive, and personalized insurance services to end-users.

Mergers and Acquisitions: MGAs Adapting to Consolidation

The idea behind MGAs is that these are highly qualified, specialized entities with narrow but thorough expertise. It means, that private equity, wholesalers, as well as insurers might want to have particular MGAs in their portfolio.

Adrian Leonard from AM Best Review said: „MGAs can provide carriers with instant infrastructure, including well-managed risk and governance structures, intellectual property in underwriting pricing, and access to underwriting talent”.

One of the pivotal challenges faced during these mergers and acquisitions is data migration. The process involves transferring vast amounts of data between different systems, which can be complex and risk-prone. This is where our product, Data Migrator, becomes indispensable. Data Migrator simplifies this intricate process, ensuring that MGAs can seamlessly integrate their data with those of their partners or new parent companies. By facilitating a smoother transition, Data Migrator helps preserve data integrity, minimizes downtime, and accelerates the post-merger integration phase, allowing MGAs to quickly capitalize on the synergies created by the merger or acquisition.

Cloud-Based Platforms: Strategic Advantage for MGAs

The transition to cloud-based software is a pivotal strategic move for Managing General Agents, marking a significant shift towards operational excellence and technological innovation. This strategy aligns with the necessity for MGAs to leverage scalable, flexible, and economically viable technological solutions. By migrating to cloud infrastructure, MGAs bypass the costly requirement for physical data centers, effectively lowering operational expenses and enhancing scalability. These cloud platforms offer advanced technological capabilities, enabling MGAs to streamline operations, secure data more effectively, and elevate client engagement through tailored and efficient service offerings.

The challenge lies in deploying highly adaptable policy management systems that can be tailored to specific operational needs while staying within budgetary limits. Our partnership with technology experts like SEND addresses these challenges head-on, providing MGAs with access to cost-effective, scalable solutions tailored to the dynamic needs of the insurance sector.

SEND's Collaborative Breakthrough: The Underwriting Workbench

Through our collaboration with SEND Technologies, we've introduced the Underwriting Workbench, a revolutionary composable insurance platform that is transforming the underwriting process for MGAs. This initiative represents a significant advancement in underwriting technology, allowing MGAs to leverage cloud computing and sophisticated data analytics for enhanced risk assessment and decision-making.

The Underwriting Workbench stands out for its modular architecture, enabling customization to fit MGAs' unique operational demands while integrating smoothly with their current systems. This adaptability is critical for maintaining competitiveness in an ever-evolving insurance market.

Furthermore, the platform focuses on leveraging data-driven insights and automating processes, which minimizes manual errors and reduces operational costs, all while speeding up the underwriting process. This enables MGAs to provide faster and more dependable services to their clients, bolstering their market position and customer satisfaction.

The Need for Robust Analytics

For Managing General Agents (MGAs), adopting advanced analytics is crucial for streamlining portfolio management and enhancing decision-making. MGAs rely on these analytical tools for effective data integration and risk assessment, essential for staying competitive. Regular reporting to insurers highlights the need for such platforms, enabling predictive modeling and claims analysis to proactively manage risks and improve efficiency.

Incorporating third-party data into these analytics allows MGAs to refine underwriting and claims processes, leading to more accurate risk evaluations and better customer service. This strategic use of data not only boosts operational accuracy but also positions MGAs for success in the insurance market's fast-paced environment.

Conclusion

  • MGAs' Distinct Position: MGAs hold a unique role, authorized to underwrite, design products, and manage claims, bridging the gap between insurers and policyholders. This independence allows for direct shaping of insurance offerings.
  • Technological Transformation: The integration of cloud-based technologies and data analytics propels MGA growth, improving operational efficiency and enabling tailored insurance solutions, thus enhancing customer satisfaction and market adaptability.
  • M&A Opportunities and Challenges: MGAs are attractive for their specialization, presenting growth opportunities through mergers and acquisitions. However, challenges like data migration necessitate efficient solutions like Data Migrator for smooth integration.
  • Cloud and Analytics Advancements: Leveraging cloud platforms reduces costs and increases scalability, while advanced analytics aid in refining processes and decision-making, leading to more accurate risk assessments and improved services.

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