MGAs see InsurTech as route to more customer-centric business models
18 July 2018 – Managing General Agents (MGAs) are increasing looking to work with InsurTech firms to enable their businesses to become more customer-centric according to the latest MGAA Matters survey1; the research-based partnership between the Managing General Agents’ Association and MGA formation platform Castel Underwriting Agencies Limited (Castel).
The survey of MGAA members, conducted in June 2018, focused on MGAs’ views on the opportunities and relationship with InsurTech, the potential impact of continuing uncertainties around Brexit, and the future shape of the MGA sector over the next decade.
MGAs view of InsurTech has seen marked changes when compared to those revealed in an earlier MGAA Matters survey conducted in October 2017. Over 42% now feel InsurTech helps MGAs evolve their business model to be more customer-centric, a leap of over 20 percentage points from 2017.
Also, their view on the benefits that MGAs can bring InsurTech start-ups has strengthened with just over 42% of respondents now saying MGAs deliver underwriting expertise that is still lacking, this compares with just over 28% last year.
The number of MGAs considering the development of an InsurTech strategy has increased by 13 percentage points from 25% in 2017 to over 38% in the latest survey.
Levels of understanding about the opportunities that InsurTech offers has also increased. Less than 4% say they are not clear on the opportunities, compared to over 12% last year. The numbers who are not actively considering investing in InsurTech remained static at around 12%.
Respondents were asked how the continuing uncertainty around the UK’s Brexit plan was impacting MGAs. Just over 23% of those writing European business said the availability of capacity or plans with capacity providers was the main impact. Nearly 20% cited concerns about future regulation costs and compliance. The detrimental impact on pricing and product development was mentioned by 15% of MGAs. The concerns of distribution partners about MGAs ability to meet their needs post Brexit was identified by nearly 12% of respondents. Just under 8% indicated they were delaying or unable to make decisions on growth or development plans.
Despite the uncertainty, many MGAs have already prepared for Brexit. Over 23% of respondents indicated they already had a Brexit strategy in place and over 30% said they were working with their capacity provider(s) on a plan. Less than 8% said they would wait until there was greater certainty on Brexit before developing a strategy.
Looking to the future, and reflecting the theme of this year’s MGAA conference, MGAs were asked for their views on what the main features of the sector might be over the next decade. There was optimism about growth potential with over 57% saying they expected the number of specialist and niche MGAs would increase. More than 38% felt MGAs would be at the forefront of addressing emerging risk and new products. The same number said there would be a greater diversity of capacity provision. The move by InsurTech firms to become MGAs would be a feature according to nearly 35%. While close to 31% said consolidation in the sector would see fewer MGAs.
Commenting on the survey findings, Peter Staddon, managing director of the MGAA, said: “This latest survey highlights how MGAs are willing and able to adapt to the new and emerging dynamics of the market. The uncertainty of Brexit and the shape of the future trading environment is a challenge for many. The government must take into consideration the significant investment in time and resources businesses are making in trying to prepare. Greater clarity around what the future will look like is important to ensure these actions have not been in vain.”
Mark Birrell, chief executive officer of Castel, concluded: “The survey shows a growing confidence and commitment from MGAs to harness the opportunities that InsurTech can bring. The future success of MGAs and InsurTech are interlinked and so the fact there is increased optimism in the sector has to be welcomed.”