OneAdvent CEO on the MGA value proposition

No place for MGAs that don’t add value

OneAdvent CEO on the MGA value proposition

Insurance News

By Mia Wallace

When the let property specialist, Let Alliance unified with HomeLet and Rentshield parent firm Barbon Insurance Group, the role of managing general agent platform OneAdvent was highlighted as being essential to the success of the merger. Speaking with Insurance Business, CEO of OneAdvent, David Hill, discussed the role of the firm in supporting such partnerships and the need for a changing value proposition within the MGA model.

Having first started in the insurance sector in 1969, Hill set up Advent Solutions Management at the turn of the century as an authorised intermediary which morphed from being a form of broker to become an incubator of MGAs. In 2015, Advent received capital investment from Dublin-based Abbey International Finance (AIF) – with AIF taking a 40% stake in the company.

The two companies worked so well together, Hill said, that they decided to wrap all their individual insurance aspects into the holding company OneAdvent.

OneAdvent’s role now, Hill said, is to essentially wrap itself around the entities it incubates and provide them with a broad range of support - from helping them find carriers, to answering their queries, to giving them regulatory permissions. Hill strongly believes, however, that the most valuable part of what OneAdvent does is not technical but rather the TLC factor it offers and its ability to simply be there when needed.

What makes a successful merger, Hill stated, depends entirely on which partner in the merger you ask. From a private equity perspective, he said, all that matters are the numbers and there is little attention paid to the company culture aspect. However, if you are the manager of the business, he said, it’s all about the people who are working there.

“We see upcoming bright young people,” he said, “who have university degrees and have been in underwriting for a bit and, for me, those are who we ought to be nurturing because they are the future.”

The future of the MGA sector in general, Hill detailed, is very much down to whether it can establish a better value proposition than it has currently. MGAs, he said, are the “flavour of the month,” but too many are not operating in the way the model is intended.

MGAs should theoretically be underwriters, he outlined, participating in the profit and the loss of risk that they help determine but “there are very few MGAs who operate like that.” Most MGAs are not making a lot of underwriting decisions, he said, so their regulatory status is that of a broker.

Hill’s advice to MGAs is that they should be thinking about underwriting profit and he offered a stark warning that, in the UK market, a number of MGAs will likely not be around in a few years’ time. Cost is the biggest challenge facing these businesses, he said, and if MGAs don’t add value to the distribution chain, there will be no place for them within that network.

In addition, carriers are constantly requesting reductions in commissions, Hill stated, but he believes that this is fundamentally fair. It might not help the model, he said, and it might be painful for a while, but overall helping to foster a better relationship with carriers is within the interests of MGAs.

In general, the MGA concept is brilliant, Hill said, and has a unique ability to provide flexibility to carriers. Within the UK, he stated, most legacy carriers simply do not have the ability to carry out services the way MGAs can. Whether it is due to their own systems falling short or a lack of understanding from investors, he said, carriers can look to MGAs to act quickly and without such hindrances.

“I think there is a huge opportunity, even now, for a properly established MGA to do really well as a business on its own, and also to do really well for the insurer,” he concluded.

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