How to be a streetwise MGA in a challenging world

FCA Scrutiny
Nearly 100 listeners recently tuned in to a recent dynamic webinar discussion entitled “How to be a streetwise MGA” which was hosted by the MGAA, featuring Charles Rowley, Director, DA Strategy; Bruce Carman, Chief Underwriting Officer, Hive Aero; and Martin Roffey, Executive Director, Willis Re – Alternative Distribution Operation.
Written by Charles Rowley
Charles is the founder and CEO of DA Strategy and has 23 years of Delegated Authority Experience, most recently as Head of Delegated Authority at Catlin.
November 25, 2020
DAS Insight

Reading Progress:

Reading Progress:

The debate focussed on how MGAs can adapt in a changing world and become more ‘streetwise’ to what the market is looking for. In the current environment where it is challenging for MGA’s or Coverholders to build or in some cases even retain carrier backing, three key topic areas were explored. Here are some key takeaway quotes from each:

How can MGAs demonstrate their value to carriers?

Bruce Carmen: “This should be a profit derived relationship, if it’s not profitable then you’d question the longevity of the relationship with the carrier, so the value is there in that regard… an MGA does give one the opportunity to underwrite on behalf of Lloyd’s carriers and other companies market at a reduced cost basis.”

Martin Roffey: “You have to prove that you have expertise and distribution – the MGA adds value as a general rule by creating a streamlined and more specific structure that enables the insurer’s brand to be more thoroughly recognised, and that produces better profits for all concerned.”

Charles Rowley: “There are all sorts of other reasons beyond distribution and underwriting expertise that a carrier will choose to do business with an MGA. One area is access to innovation – most carriers by their own admission are pretty slow at developing new systems or uses for technology… it’s definitely an area which MGAs can demonstrate the effectiveness of IOT devices for example, and how this technology can deliver for them.”

What does effective partnership mean for MGAs?

Martin Roffey: “It’s really important to work out what makes your carrier partner tick. Each insurer will all say they want profit, but each will have an emphasis on different things, such as data etc. If the carrier says they are really interested in distribution, that is where the MGA should of course concentrate. I would also make sure that you become indispensable to the carrier, talking to everybody in the value chain.”

Bruce Carmen: “For us, we make ourselves indispensable by making sure we do things in a way that the carriers can’t or don’t. For instance pricing analysis, following what we call knowledge-led underwriting – we are trying nowadays not to rely solely on historical data, and be more forward-looking and predictive with the way we marry data and underwriting. We try to model these things so that when we come on to exposure analysis we can offer realistic pricing and profit forecasts for our carrier partners. Personally, I think an underwriter is defined not just by what they write, but also by what they don’t write.”

Charles Rowley: “That is a brilliant point – how many MGAs tell their carriers about what they’ve been declining? I think it’s important to get that message across. As well as what Martin was saying about delivering consistency, delivering transparency and honesty, and delivering to your promises.”

What are the impacts of technology and data on the MGA sector?

Charles Rowley:I think MGAs need to be careful about how much data they share with carriers, and what is their IP (Intellectual Property) within that data. To be successful MGAs need to be the best in their niche, and to stay ahead of a lot of the other underwriters in that niche. It’s about gathering that extra data, and protecting and using it so that you have longevity.”

Martin Roffey: “It comes back to creating the right kind of environment and partnerships. The classic MGA client that I would like to have doesn’t use insurtech as the only measure but combines this with underwriting expertise, and knows how to analyse that data in order to produce the right kind of loss ratios for their insurer clients.”

Bruce Carmen:I really want to see more structured data coming through the pipeline and the specialty market is behind the times with this. What we’ve done is spent a lot of time and money on data feeds from intel providers, and that for us is a differentiator. We’re picking aviation apart and looking at where the pockets of profitability are, and data allows us to do that. The analytics that we provide allow us to punch way above our weight.”

 

There was just enough time for a Q&A session at the end, and it’s well worth listening again to the full webinar here!

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