The term ‘data’ is mentioned 535 times in Lloyd’s latest Blueprint 2 ambition document. And for those of you who haven’t had time to read every sentence in detail, it can essentially be summarised as: data and its effective use is the critical building block for modernisation across our market.
So it clearly stands to reason that the effective and efficient use of data should feature highly in the boardroom agendas for all delegated authority businesses.
My question to the market is, how many Delegated Authority businesses really have data-driven insights as a high priority board topic?
The sector is under pressure to maintain the 40% market share attributed to Lloyd’s DA through its c. 4,000 Coverholders and 350 service companies who channel and manage much of this business, but how many Coverholders and MGAs can truly say they are putting all the data at their fingertips to the best use?
MGAs, coverholders and brokers are facing more challenging market conditions than they have navigated in the last 18 years since 9/11, and are experiencing intense scrutiny from their insurance partners as a result. They must prove – in detail – to their carriers that they are adding value.
But the shocking under-investment in data and systems seen over the last decade or more can make providing this proof a struggle.
Running actuarial analyses over limited existing data sets is, at best, a temporary solution. MGAs must provide their insurance partners with real insight – capturing and analysing data is at the heart of this.
Staying ahead of the curve
To succeed, MGAs partnering with carriers must identify what “in-product” data is relevant, integrate this with third party data feeds and then synthesise this into quantifiable and logical outputs.
MGAs that do this will be able to precisely identify their specific pools of profit or peaks of risk and stand out from the crowd. It is no longer sufficient to have a good idea about a product, a network of contacts in the market and experience. Data-led evidence is required to carve out a sustainable competitive advantage.
A competitive advantage
An MGA can carve out and prove a unique proposition – i.e. their value add – by harnessing data insights in key areas such as the correlation of claims frequency or severity against identified and relevant third party data sets. Other examples include using customised off the shelf packages to identify patterns in claims data or quantitatively evaluating customers habits and buying journeys.
MGAs that use data in this way will attract more backing and attention from insurers and risk capital partners. The technology to achieve this is readily available and can be integrated with existing IT platforms.
Smooth end to end data flow, workflow and visibility using such solutions are essential. This takes time and is important to think through in detail to deliver maximum efficiency and savings for the future.
Aligning with carrier partners
Alignment is key, and I don’t just mean with profit commission! Ultimately, an MGA that is really committed to demonstrating their value to and alignment with their underwriting partners should be clear on what it is that they bring to the partnership, and be open to having a transparent discussion about how that value is remunerated, particularly in hardening market conditions.
It is a two way conversation. MGAs that are open, prepared and ready to be challenged on their commissions, not only to justify them but also to explore different options and structures are better placed to grow in the current challenging market.
Amid increasing pressure from insurers for their partners to prove their worth, MGAs that embrace transparency and proactively demonstrate their value and alignment to insurers will enjoy longer and more productive relationships.
Further reading – DA Strategy in The Insurer: How MGAs Demonstrate Value Amid recent Shocking Under-investment in Data (subscription)
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