Despite many MGAs viewing conduct risk as a business differentiator, the majority of MGAs want a unified process to assess risk and avoid misinterpretations.
A survey of 31 full MGAA members was conducted in March in cooperation with Castel
Underwriting Agencies, looking at the steps MGAs take to ensure their businesses are engaged in the conduct risk process.
Almost seven in ten (67%) of MGAs said conduct risk is or may be a business differentiator which gives a chance to show they’re in front of the competition. However, almost six in ten (58%) recognise a lack of consistency and understanding in the application of conduct risk, and these MGAs are calling for a standardised assessment process for insurers and capacity providers.
The organisations surveyed believe actions speak louder than words, especially with assessing, identifying and managing of conduct risk. More than 64% have contacted their insurers/capacity providers and show initiative in laying foundations for the process, by conducting product assessments (71%), distribution and supply-chain assessments (51%), and capacity provider/coverholder audits and follow-ups (45%). More than three in four (77%) have a designated individual to handle complaints.
A large majority of MGAs agree on the definition of conduct risk, with 84% describing it as “the risk that a firm’s behaviour will result in poor outcomes for customers”. There is some disagreement on the potential impact it will have on customers, though. More than 45% agreed it will improve customer outcomes, over 48% are unsure and nearly 7% say it will make no change.
Over 64% of MGAs have reported an increase in scrutiny from their insurers and capacity providers, while 58% were assessed and asked specific questions on conduct risk. Around half (51%) saw increased levels of oversight on binders. Only 19% report their level of engagement did not go up.
Peter Staddon, managing director of the MGAA said: “This Survey illustrates that although MGAs are embracing conduct risk, there’s a pressing need for a standardised process, which our members are working hard to facilitate. We see a clear need for a unified approach, where the whole distribution chain agrees what’s needed and more importantly, agrees on the meanings of each component in the process.”