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New business emerges to flip the script on MGAs historically being treated as "incompetent”

New business emerges to flip the script on MGAs historically being treated as "incompetent” | Insurance Business UK

New business emerges to flip the script on MGAs historically being treated as "incompetent”

It was a single spark that lit the flame of Accelerant Holdings - the realisation that the siloed nature of a traditional insurance company or syndicate could never be as customer-centric as it needs to be in this day and age. It was armed with this understanding that Jeff Radke, co-founder and CEO of the company, and his co-founder Chris Lee-Smith, asked themselves the question, ‘what are the most customer-centric organisations in the insurance sector?’.

“Of all the people we knew in the industry, it was clear that this was the MGAs,” he said. “They know their distribution niche, and they know their ultimate insureds and, in my view, they have a better understanding of their insureds’ profiles than anyone else in the industry. Chris and I decided to start Accelerant because we felt that, if you started from the ground up, you would have the ability to build a technology-fueled, data-driven organisation, without silos.”

The model of Accelerant allows it to simultaneously focus on its MGA partners and the risk bearers on the back end, backed by extensive partnerships with reinsurers as well as other risk capital forms. Since it launched in 2018, the group has gone from strength to strength, and recently expanded into the UK through its acquisition of Kinnell Holdings. The reason for this ongoing success, Radke believes, is simple – MGAs are generally treated “unbelievably badly” by their capacity providers and have seized on the opportunity to be supported and valued.

Examining how MGAs are currently being let down, Radke noted that, especially in the small commercial space, these firms are under consistent pressure because it’s almost impossible that one or another line of business is underperforming at any given point. Thus, MGAs continually find themselves under pressure from one underwriter or another and are constantly fighting the “product versus customer” conundrum.

“The second thing is every MGA is inconsequential to every capacity provider because of the way that the market [works], where you’ll have five or six syndicates on a binder,” he said. “So the easiest thing in the world to do is just nonrenewal [when there’s a problem] - there’s no sense in working to fix the relationship as it’s not big enough. So you have this incredibly brittle relationship, where the MGAs are treated somewhere in between incompetents and criminals by their capacity providers.”

Even look at the Lloyd’s set-up, Radke said, where MGAs have to audit their accounting and underwriting twice a year. It’s hard to imagine any other situation where, twice a year, a third party comes into your business on the premise that you are breaking your contracts.

Accelerant is changing that conversation by applying simple common sense to the relationship. He highlighted that this means embracing the fact that supportive relationships are the key to long-term success and prosperity. Accelerant wants its MGA partner relationships to be big, to be long-standing and to be founded on the premise that neither party can afford for the other to fail.

Read more: Pro MGA Solutions CEO discusses the evolution of the MGA sector

“We are in this for the long term,” he said. “And the way we manage that is multi-faceted. Firstly, we say ‘we want to write all your business, 100%’. Of course, there are some occasions where we don’t do that because there’s a mitigating reason, but our philosophy is, we want the diversification of their entire book, because history has shown that’s more profitable than trying to pick particular lines or particular products.

“Secondly, we say ‘as long as your behaviour is appropriate, your loss ratio is appropriate and you are completely transparent with your exposure data, we are happy to give you a five-year commitment of capacity. And that’s usually the point where the MGA stops listening to our other benefits and just start smiling.”

It makes such a difference for the senior people in the firm to get to spend their time on the business as opposed to in London, trying to get their binders renewed, he said. The time sink of that renewal is incredible, so to have the chance just to focus on brokers, producers and customers means the world to these professionals.

“It comes down to a few solid values that our parents could have taught us if we had listened,” Radke said. “That is to treat people like adults, to give them accountability, and trust, and then have the technology and [data analytical tools] in place to follow up and make sure that they’re living up to that trust.

 

“And then on the other end, just play with a fair deck of cards, where you’re not withholding information. If you share openly with partners and treat partners like partners, so they can participate in the entire probability distribution, then you’ve created a revolutionary business completely fueled by technology and data and underpinned by incredibly strong relationships. And that’s only by following the lessons that we were probably all taught when we were eight years old.”