There are market forces weaving their way through the entire insurance value chain, impacting all firms from the largest global insurers and reinsurers, to niche program administrators, to managing general agents (MGAs), and the smallest of independent brokers.
Today’s top trends are: consolidation, insurtech innovation and distribution evolution.
In the past few years, a red-hot mergers and acquisitions (M&A) environment has emerged. We’ve seen American International Group, Inc. (AIG) snap up mega-brokerage Glatfelter Insurance Group (Glatfelter), as well as Marsh & McLennan Companies agreeing to purchase Jardine Lloyd Thompson Group (JLT). They’re two big-ticket deals that stole the headlines, but consolidation activity has been happening throughout all insurance marketplaces.
Two factors driving consolidation are the evolution of insurtech and heightened pressure to refresh distribution models. Again, these factors weave in together. For example, a brokerage might consider acquiring an insurtech firm so that it can utilize and own the insurtech’s bespoke distribution model.
Chris Leisz, president of the programs division at Risk Placement Services, Inc. (RPS), a division of brokerage giant Arthur J. Gallagher & Co., told Insurance Business he’s looking at the industry trends of consolidation, insurtech and the distribution evolution as “exciting opportunities”.
“The fundamentals of program administration business are agility and the ability to respond quickly to changes in the marketplace or changes in buying habits,” he said. “Consolidation is impacting the program administration marketplace in the same way that it’s impacting brokers and carriers. Where the program administration market has an advantage is that we have a dedicated focus to niche parts of the property and casualty (P&C) industry, and deep underwriting expertise to back that up.”
As part of Gallagher, RPS has a well-developed distribution platform with access to over 25,000 agents. The unit administers more than 20 unique programs from eight independent offices around the US. Despite being considered a large program administrator, RPS is always looking towards innovation, improvement and growth, according to Leisz.
“Automation and technology will continue to grow in prevalence, not just in the P&C market as a whole, but also for program administrators and brokers and so on,” he commented. “For us, the question is: how can we continue to support our deep underwriting expertise and unique distribution capabilities with strong data and strong technology? Moving forwards, we’re going to have to continue to look to partner with or consolidate insurtech firms that are bringing change to the network.
“I have confidence in the value that program administrators bring to the insurance industry. Oftentimes, people ask: ‘Why would you partner with an insurtech? You’re going to empower them to disrupt you.’ Program administrators focus on difficult-to-place business. Our differentiation is our distribution platform alongside our deep understanding of a niche focus area. That’s not easy to disrupt. Rather, developing strong partnerships with committed carriers and innovators could bring about some really exciting changes to the insurance value chain.”