So, you want to start up an independent brokerage? Anyone who has ever considered going it alone are most likely thinking about the challenges that may come up in the process, such as getting clients, turnaround times or whether to work remotely or in a traditional office space. A great solution to these obstacles for guidance and support is the MGA sector.
According to Gary Hirst (pictured), president and CEO of CHES, industry trends show that “MGAs are an important part of a broker’s life nowadays and they can give the entrepreneurs confidence to start up their own entity.”
Insurance Business spoke with Hirst about the services MGAs can provide to budding brokerages to gain a foothold in the insurance industry, his enthusiasm for tapping into entrepreneurial aspirations and why independent brokerages have an edge in today’s hard market.
MGAs have been increasing in productivity and scope for years, which makes these entities a reliable source of business and guidance in the contemporary shared economy model.
“The amount of business that MGAs currently have in store, in terms of premium volume, has seen a very large increase over the last three years,” said Hirst.
With this upsurge in volume and scope, independent brokers who are breaking into the industry can tap into an MGA’s resources and capabilities in several ways that can make the startup process more streamlined.
“MGAs have the authority to quote and bind in house, so that does make the process quicker for a broker,” said Hirst. “There is also a faster turnaround time when these companies are able to issue its own policies and invoices.”
There is also the need to appeal to modern day regulation and compliance standards, which can add to the stresses of creating a workflow that is tuned into best practices. “The battle of trying to find a market to ensure that a submission you’ve produced is following correct procedure also adds to the workload,” Hirst said.
“With an MGA, it can take a lot of that pain away and allow these new business owners to worry about other things, such as whether they have cloud WiFi in the office or if they’ve selected the appropriate business management system.”
Hirst has worked in the independent brokerage sphere throughout his decades-long career in insurance, which has given him insight into why pursuing this avenue can be a beneficial course of action.
“It does give you a reason to get out of bed in the morning,” he said. “I think it keeps you sharp, especially in a marketplace that sees large entities that aren’t always there to help the problematic insureds find solid coverage and not get batted backwards and forwards between various brokers.”
Hirst has experienced firsthand the various considerations that must be mulled over before going independent.
“There are a lot of sleepless nights and dynamics to be mindful of, but there is a lot to offer when your goal is to help individuals insure their assets or businesses — you’re going to eat what you can kill,” he said.
While inflation, increased premiums and reinsurance wobbles may deter many conglomerates from acquiring novice clientele, this is where independent brokers can come in and shine.
“I do think that the current market environment is very good for new brokerages,” Hirst said. “There is a lot of restriction in capacity, which is great for trying to court clients who need insurance now.”
There is also the question of those who are unsatisfied with their reinsurance options and renewal premiums, who will often look to other businesses to get the quote they desire.
“These new companies are able to generate new business, and, with the support of MGAs, small brokerages can step up when more traditional insurance providers can’t, which is a huge advantage,” Hirst concluded.
