To say that the MGA insurance distribution space in Canada is highly competitive is an understatement. What was once a relatively uncontested space in which underwriters could thrive is now being encroached on by hopeful start-ups leveraging the latest in insurance technology (aka ‘insurtech’), as well as the insurance producers MGAs have partnered with.
So with their existence on the line, what can MGAs do to survive and thrive?
MGAs could try focusing on product distribution as their selling point, suggested David
Howden, CEO of Hyperion Insurance.
“It’s all about distribution. If you can’t get your product out there – then don’t bother,” Howden explained. “We need to look at how we can deliver value to the client.”
In a Managing General Agents’ Association (MGAA) conference in London, UK, Howden addressed the participants present, saying that some of the pressure on MGAs is a result of insurtech companies utilizing data to lower premiums. Howden pointed out, however, that the use of data to compute premiums is a tech trend the entire insurance market has to adapt to, not just MGAs.
“Brokers want efficiency. The challenge for MGAs is to think about the underwriting as well as being efficient distributors,” he said. “MGAs need to consider their products, their distribution and their underwriting at the same time. Anyone who can think about all of those things at once and get them right, will survive in the market.”
“If MGAs don’t invest in data, they will be dead in the water,” he added. The use of data aside, a little competition in the insurance industry is not necessarily a bad thing, noted
CHES Special Risk president and CEO Gary Hirst.
“New entrants are coming in and are trying to buy market share,” said Hirst. “But MGAs earn income as a result of commission and not necessarily through the underlying profitability of an account, so one would be skeptical about the motivation of an MGA coming into the market space and cutting price.”
Hirst also believes MGAs have an edge over insurance companies: “MGAs can be a lot more innovative in terms of product application because reporting lines are usually fairly short, whereas with an insurance company they are extended and often involve a treaty agreement.”
