Although traditional brokerages continue to serve an important role in the insurance space, more small firms are taking out the middleman by directly purchasing insurance online.
“The traditional insurance broker, their days are numbered,” said Christopher Williams, Tokio Marine HCC CEO. “If you look at a smaller premium, SME-type business, it will be very soon where you can do that online.”
Williams thinks that the current roles of insurance brokers will be rendered redundant thanks to insurance technology, or insurtech.
“Smaller firms will soon turn online for their insurance needs, rather than relying on a broker,” he said. “Multinational firms, or those with niche risk profiles, will still require a broker to assist, but they will need to develop past transactional duties.”
Businesses, particularly young start-ups, are increasingly internet-savvy, and many would use the web as a way to shop for insurance. New insurtech companies such as Lemonade offer insurance solutions through phone apps.
Insurers have also taken an interest in the potential of insurtech. Some of the major players – Economical Insurance, Allstate and Sun Life – have started to offer their own take on online insurance distribution. Others, like Aviva Canada and Allianz, have invested in insurtech start-ups to drive innovation.
So what does all of this mean for MGAs?
Despite insurtech, MGAs will still be able to serve their current roles. Insurance-Canada.ca founding partner Patrick Vice said that MGAs are “more interested in leading with the business
opportunities, not the existing technology”. He said insurtech companies might have the newest tools, but MGAs still possess “the ability to engage users, utilize data and sophisticated algorithms, and produce business results.”
It also helps that MGAs are still approached by insurance companies to write coverage in provinces the insurers do not have a licence for. So while brokers face big strong challenges, competent MGAs appear well-positioned to take on insurtech and thrive.