Highlights
- MGAs make up the fastest-growing part of the insurance industry over the last five years, and this is set to continue given specialisation and a focus on strong tech foundations.
- Claims, historically underinvested, will increasingly become a differentiator as MGAs gain better visibility and insight through specialist claims partners than they would through a large insurer’s internal claims department.
- The industry is at a sliding doors moment as regards AI – it can transform repetitive tasks, but the human interface may become a point of differentiation in the future.
As part of Inflexion’s focus on the insurance sector, the firm recently invited Michael Keating, CEO, Managing General Agents’ Association, to share his thoughts on sector over dinner with the portfolio.
MGAs have become a vital and fast-growing part of the insurance ecosystem, driven by specialist underwriting expertise, agility and modern technology foundations. “We believe the next phase of growth will be defined by those businesses that can combine entrepreneurial culture with investment in data, talent and disciplined governance – creating resilient platforms that are attractive to customers, brokers and capacity providers alike,” says Andrea Bertolini, Partner and Head of Financial Services at Inflexion.
The MGA model has grown significantly over the last decade. Was this driven by favourable market conditions, or is the model fundamentally sustainable?
There are several factors at play. First and foremost, the MGA sector in the UK, Ireland, Europe and globally has become the fastest-growing part of the insurance industry – driven by the underwriting expertise sitting within MGA businesses.
MGAs operate on third-party balance sheets, with insurers deploying capital through MGA partners to gain access to specialist expertise and niche markets. That relationship is built on underwriting knowledge. As long as MGAs continue to offer differentiated expertise, the model will remain sustainable.
A second driver is the ongoing move of underwriting talent from large insurers into the MGA market, which offers innovation, entrepreneurship and agility. Senior underwriters increasingly want to operate in environments where they can move quickly, specialise and build something different. That transfer of expertise into the MGA sector will be a major driver of its continued resilience.
The last five or six years have provided tailwinds across insurance, particularly around rate hardening. But it is important to remember that this has benefited the entire sector, not only MGAs.
What MGAs have done particularly well is build modern IT stacks rather than the complex legacy systems that larger insurers often carry after years of acquisitions. It gives them a single source of truth around pricing, underwriting and reserving, which alongside their expertise puts them in a strong position to navigate any downturn.
How can MGAs preserve their entrepreneurial culture and specialist expertise when private equity invests?
Private equity brings more governance and structure, and there is a risk that too much can erode what made the business successful. But the best investors operate as partners who are there when required without overstepping and damaging the entrepreneurial culture.
Equally, MGAs are increasingly sophisticated in choosing investors. Many effectively run a beauty parade, selecting partners who understand why they have succeeded and who can complement the existing strategy.
Making that relationship successful comes down to alignment of objectives – everyone needs to understand where they are trying to get to and how they will work together to achieve it.
Culture also matters far more than it used to – it is a genuine hygiene factor nowadays.
Will claims management become a greater point of differentiation for MGAs, or remain largely with carriers?
I believe claims will increasingly become a differentiator. Today, more than 90% of MGAs outsource claims to third-party administrators. That is often because MGAs feel they gain better visibility and insight through specialist claims partners than they would through a large insurer’s internal claims department, where visibility can be reduced.
I also believe claims has historically been underinvested across much of the MGA market. This is partly because it has often been viewed as a back-office function, though in reality, claims is the window through which customers experience an insurer or MGA.
With the right investment, claims can become a real competitive differentiator.
Done well, claims management can improve loss ratios, unlock profit share and attract more capital. It can also strengthen reputation and credibility with distribution partners.
Additionally, regulators are paying closer attention to claims ecosystems, particularly delegated claims. MGAs that invest well in this area will be better positioned in future.
How much of the claims journey can realistically be automated, and where does human judgement remain essential?
Repetitive operational tasks within the claims journey should increasingly be automated, particularly where there is minimal impact on customer experience.
The challenge is deciding how far automation should go.
Where claims involve vulnerable customers or emotional situations, human interaction remains key. A customer dealing with a difficult claim may not want to interact solely with a chatbot. Equally, if brokers are the customer relationship, organisations need to think carefully about how automation affects that.
The customer journey and relationship is crucial, so organisations need to assess reputational risk, leakage and whether technology could inadvertently extend claims cycles rather than improve them.
The industry is at a genuine sliding doors moment. Technology can transform claims, but the human touch may become a point of differentiation in the future.
