Charles Rowley of DA Strategy explores several themes set dominate the movement around delegated authority in 2020 and beyond.
Not only did January 2020 mark the start of a new year, we’ve boldly marched into a new decade.
It is common at times like this for us to ponder ‘existential’ questions around what the future will bring, or more specifically in our case, what the next 10 years might hold for the global insurance industry.
Indeed, time is the greatest bringer of change and we expect a lot to happen in the industry as it continues to transform itself to meet the ever-changing needs of clients, the increasing complexities around risk, the necessary adoption of technology and the need to for more innovative structures and solutions.
We are not bystanders of change at DA Strategy and are committed to facilitating the transformation of the industry in any way we can.
Delegated authority (DA) business or arrangements – whether it’s a managing general agent (MGA), coverholder, binding authority or portal provider – is set to have a more dominant presence in the industry’s future. It is through this lens that we set out what we believe to be the main themes of 2020, and indeed, beyond.
2020 DA Themes
There has been a considered focus on quality MGAs in the last year which is impacting the way in which carriers are working with these entities and vice versa. There are now far greater expectations on MGAs which means they need to be fitter than ever to thrive and ultimately, survive.
Carriers are no longer willing to support ‘any old MGA’. They are actively looking for those who clearly represent deeper long-term opportunities for growth, regardless of the vocation, and they want to feel a real sense of partnership. Previous market dynamics which saw some MGAs shuffling around carriers with blurry objectives, are changing. Symptoms of this have been carriers shutting down covererholder arrangements that aren’t providing scale or profit; often those with unjustified commission expectations. It is in light of this that we see top carriers forming closer and deeper partnerships with their DA partners – regardless of set-up.
Seeing a real MGA becoming a Syndicate in a Box (SIAB).
In 2019 we witnessed the first launches of SIAB as part of the Future at Lloyd’s agenda. At DA Strategy, we believe the real targets for this Lloyd’s reform are those underwriters and brokers who have bravely set up on their own, often as MGAs who now want to become risk carriers. Transitioning into a syndicate at a lot lower cost than the current £10-20m turnkey route is key in our view to introducing additional vibrancy to the market. Our hope is that those targets will emerge in 2020 and we look forward to witnessing and working with MGAs who plan to go down the SIAB route.
Seeing an Open DA SATS become fully fit for purpose.
Whilst the delegated authority data standards (DA SATS) system was launched in 2019 and is mandatory for Lloyd’s European business, it is by no means complete and must develop rapidly. DA SATS can fix the complicated legacy bordereaux issue. However, it must be made open via application processing interfaces (APIs) as soon as humanly possible to gain acceptance and real (rather than mandated) traction. The decision not to include APIs to key market and MGA systems around the world must count among the major mistakes in this program.
The data extract is a further stumbling block. Finally, we also believe that coding consistency for key fields such as industry sector, occupancy and loss triggers (among other areas) is required to enable both lead and follow carrier usability and that engagement on these sooner rather than later is essential.
Continued successes in claims delegation.
It goes without saying that claims delegation took great strides forward in 2019 and we eagerly anticipate that 2020 will be the year for embedding and gaining efficiency.
We see the moves by leading edge carriers to put claims DA due diligence, auditing and contract management under the same DA administrative roof as that of coverholders, will deliver much needed efficiency gains.
Bringing together management information (MI) and bordereaux reporting in claims can – if executed well – deliver further benefits. We expect to see more DA claims and DA underwriting teams enjoy better coordination in 2020, knitting together tools and service offerings to give better customer outcomes via faster claims payment and more efficiency.
For us, this is an area that needs continued work. Our observation is that no one has really properly addressed how to make sure MGAs, coverholders and TPAs are more cyber secure. We believe there are many coverholders and MGAs out there who need support with their cyber security and data protection strategies and that more help needs to be directed this way.
As the year progresses, the team at DA Strategy will be providing further insight into these themes and any other topics we view as being the key things to watch out for in the delegated authority space.
Please contact us if you have any questions or would like us to help you.
As always, we welcome your comments and debate.