How can MGAs future-proof their organisations? At the MGAA’s recent webinar on this topic, presenter James Elliott, new business executive at INSTANDA, polled the audience to gauge their confidence in their short- to medium-term financial and operational resilience. Just under 50% of attendees stated their conviction that their MGA is not future-proof, which begs the question – how can this be changed?
Central to building a future-proof business is having a clear grasp on the key trends sweeping the MGA market and the opportunities these represent. Offering his take on these trends, MD of Intelihub Consulting, Derek Findlayson noted that, as a result of the hard market, insurers are now looking to push through price increases and rate strengthening.
Read more: The evolving proposition of successful MGAs
“Some of this is driven by the reinsurance market, with people becoming more selective in terms of product lines,” he said. “We’ve seen examples of increases in terms of pricing of anything up to 300%, which has got to flow through into other areas. And the reality is that most of the insurers, though not all, are actually sitting on their own legacy technologies or multiple versions of that. So increasingly, we’re finding that they want to deploy their technology through MGAs.”
From an MGA perspective, he said, the market appears to be growing at a faster pace than any other area - and he has seen that top-performing MGAs and schemes specialists are being targeted by acquisitive brokers. A common thread between these top performers is their focus on niche areas. Findlayson believes that the days of MGAs providing vanilla products that are the same as those offered by others in the market are now limited.
CEO of Imperium, Tony Lawrence highlighted that the market is a lot more challenging today than it was even just six months ago. An MGA looking for new capacity has to have a strong track record, which makes it that much harder for newcomers. He believes MGAs have to be niche and demonstrate their ability to blend the expertise of their people, their specialist underwriting and their technology in order to be successful.
“In my position I liase with a lot of start-ups, some of which come to fruition and some of which don’t,” Elliott said. “[And] I’ve spoken to a number of people who have been looking to launch an MGA over there the last year or so. The desire is there, the idea is there, and certainly, the proposition is there - but they haven’t quite been able to convince a carrier to take a punt on them. And I think this is a testament to the fact that, at the moment, there’s not a great deal of appetite for carriers to start taking risks on new businesses or new propositions, unless there’s either a track record or a very specific niche that they’re looking to take over quickly.”
Any good MGA needs to be asking itself one essential question, according to Paul Rich, director at MOTOSI Consulting – “what is the demonstrable value in what I offer to the marketplace?”. This question of value extends to capacity providers and any other stakeholders that enable the business to execute on its delegated authority proposition.
Capacity providers, in particular, are demanding proof of this value. Now there is a real structure and real governance that is required, Rich said, to demonstrate value, commerciality and the point of entry to the market where MGAs can deliver products and services on behalf of capacity which can’t necessarily reach that market itself.
“I think that’s where the value in a delegated authority proposition is,” he said. “You can say to the capacity, ‘we have access to a demographic, we have access to a marketplace, that you alone, won’t necessarily be able to gain distribution access to. I’ve got the expertise in my staff, I’ve got processes that support the proposition, I’ve got the technology as well. And, key to that, I’ve got access to that particular marketplace.’ And it’s very supportive of that whole niche plain which is where I think coverholders, delegated authorities and MGAs really can and do excel.”
