MGAs should be the lighthouses of digitalisation
MGAs are under pressure to justify their place in the distribution chain. We explore how leveraging technology and adopting a digital-first mindset can drive efficiency and create value, both internally and externally.
MGAs in the UK are worth over £4.7 billion, yet hardening markets, the pandemic and increased pressure from carriers are creating a challenging environment for these businesses. MGAs need to prove they’ve earnt their place in the distribution chain but how can they do that effectively and what role does digitalisation have to play?
Like many industries, putting the customer first fundamentally drives the way insurance companies operate. Insurers are looking for MGAs that are in control of the value chain, with a true customer understanding and a means to reach those clients. Oh, and all this needs to be done as efficiently as possible, at the lowest possible cost! An unachievable task perhaps… but this is where digitalisation comes in.
Typically, the bigger the insurance company, the greater the challenge to introduce digitalisation. Convoluted IT landscapes, product complexity and the heavy burden of compliance all contribute to resistance. And this is where MGAs have an advantage. They can be much more flexible in their introduction of new technologies and carriers can leverage this to incorporate digitalisation into their own businesses. There’s no need to undertake a huge re-engineering of their legacy systems, which, let’s face it, do a pretty good job of servicing an already existing customer base.
The What, Why, When and Where
Crucially, there is no one size fits all. MGAs don’t need to compete with the big industry players in terms of investment or strategy and what works for one company won’t necessarily work for another. Before implementing any sort of technology, it is vital to evaluate all areas of the business and assess what changes need to be made. Where are the pain points? What manual processes could be superseded by tech? What will help people do their jobs more efficiently and effectively?
Having an AI powered chatbot or a blockchain-based ledger is not a standard requirement for success and doesn’t always equal big returns. Clearly, technology has a place – Gartner reported a global IT spend in insurance to reach $222 billion, even with a pandemic in play – but the number of options available can be overwhelming. Companies need to take the time to laser focus on the problem that needs solving and once a technology has been identified as a potential solution, put together a clearly defined roadmap to manage the implementation. It can be as simple as using AI to assist with document management or digitizing paper records to streamline the back office (we are all familiar with the voluminous piles of paper the insurance industry produces!). Remember, if goals and project objectives are not properly defined, there’s no leadership buy in, or if communication goes out the window, then the initiative is guaranteed to fail.
At OneAdvent, we’ve seen first-hand the catastrophic effects of digitalisation done well and poorly. A previous (failed) foray into the world of SME PMI showed us that you can’t just take an existing process and stick it in a web browser to achieve digitalisation – changing buyer habits is not that simple! On the flip side our non-standard UK property MGA, Modus, have just launched their new broker quote & bind portal ‘TryModus’. The technology and UX is certainly not revolutionary but the investment they have made in developing their complex rating engine means that they can almost eliminate the requirement for underwriter referral for all non-standard UK commercial and residential property quotes and thus have streamlined the overall process.
The 2020 MGA report from Clyde and Co revealed that over 60% of carriers and MGAs think that technology is an “important factor in the success of their partnership”. Carriers are increasingly demanding more from MGAs. They need to look beyond offering niche products, speed and flexibility; it’s what can be provided from a management information and data prospective that demonstrates the true value add of an MGA. Relevant and high-quality data collected by these businesses can provide key insight into the risks that have been written, policy holders, premiums, claims and a whole myriad of information that a carrier needs. Such information collaboration can be used to create products that are more in tune with customer requirements, increase profits and improve customer understanding.
One of the key questions an MGA should be constantly asking themselves is “how can I help carriers solve X problem”? Insurance carriers depend on MGAs to help grow their businesses quickly, by giving access to niche opportunities at a lower entry cost. Using data analytics, for example, can provide real time customer insight, all whilst creating efficiencies and improving the overall purchasing model. MGAs that are run by digital natives and implementing intelligent solutions are more likely to enjoy longer and more profitable relationships with their carrier partners. Perhaps there will come a day when such an MGA participates in the insurance risk (profit and loss) thereby getting aligned with its carrier.
There is a plethora of technologies out there that could be incorporated into an MGA but the fundamentals need to be addressed first, as part of the wider digitalisation strategy. Small changes can be powerful and transformative; creating efficiencies, increasing productivity and saving costs. By putting technology and digitalisation at the forefront of an MGA offering and by understanding the needs of the carriers, MGAs can make themselves front and centre of the value chain.
Focused on getting innovative insurance businesses to market – and fast – OneAdvent provides a springboard for growth across the industry. Operating as an MGA platform, Lloyds broker and niche product distribution business, OneAdvent brings its sector expertise and technical know-how to bear for established industry players and entrepreneurial start-ups around the world.