- Where Insurance & Technology Meet

MGAs Walking the Specialty Line

Managing General Agents are getting attention of late.  A recent study finds that the MGA channel is growing faster in commercial market production than the commercial segment generally.  It points to specialty lines as a key driver.

An international MGA association cites the need for MGAs to leverage analytics / modern technology to maintain the success. Last, but not least, the 2015 Executive Forum will explore the MGA/Specialty trends, and technology enablers.

Specialization + Quality MGAs = Profitability

A recent Conning Research report, Managing General Agents: Superior Growth in Specialty Markets, focuses on the US market, and notes that insurers are increasing commitments to the MGA channel, as the specialty lines business is less sensitive to pricing.

In a press release accompanying the report, Bill Broomall, assistant vice president, Insurance Research at Conning, said, “Our analysis of insurer filings and Conning’s proprietary survey of the MGA market confirmed that MGA market premium growth rate far exceeded that of the commercial lines sector for both the past two years.”

Broomall added, “In fact, the MGA market posted higher growth rates than the rest of the commercial lines in 2014, despite rate softening appearing in several lines.”

Steve Webersen, Head of Insurance Research at Conning, said “There is no question that more insurers are entering and expanding their commitment to the MGA space. This greater competition for quality MGAs and programs is welcomed by distributors who can best serve this market.”

 But not all MGAs are created Equal

The American Association of Managing General Agents (AAMGA) Emerging Issues and Trends Committee recently  produced a ‘heat map‘ which aligns with the Conning study.  The committee writes:  “Record high capacity continues to restrain a hard market.” And this capacity “continues to enter the market via expansion by existing insurers and new entrants.”

The committee notes that insurers are underwriting new, targeted, data driven  products, which are employing new pricing models, including ‘Behavioral Pricing’. According to the committee, this

will change how wholesalers offer products and how they are priced in the future. The availability of devices (Internet of Things) and Social Relationships and Media can be utilized with the Analytics of Big Data to drive pricing to a much more exact level. Behavioral Pricing can change how we introduce present day data to be combined with historical trends to deliver pricing that much more accurately reflects the risk.

This puts pressure on MGAs to step up their technology games.  The committee notes: “The technology gap between those who have and utilize and those who do not is widening. … Technology is continuing to expand at a rapid rate and many are struggling to define and implement their roadmap.”

There are rewards for the MGAs that do, however.  When commenting on Big Data Specifically, the committee finds that as carriers utilize increasingly sophisticated analytics, agency profitability could be one of the factors, putting less sophisticated agencies at a competitive disadvantage.

How does this work in Canada?

An increasing number of insurers are seeing the value of MGAs in specialty lines and are actively developing relationships.  Lloyd’s is one of the most prominent in  developing and implementing strategies.

From the top down, Lloyd’s has recognized MGAs for the critical role that they play in supporting its global and local strategies.  Canada is a good example.  Writing in his blog, The Lookout, Roger Brickmore notes:

Hosting a Cover-holder forum recently (2013)  near Vancouver was a good reminder of just how far Lloyd’s has come in Canada by carefully nurturing an impressive network of empowered Managing General Agents (MGAs) on the ground. An annual premium volume in excess of $2 billion is being generated and better still, a significant part of this is mainstream commercial business, normally inaccessible in most other countries.

Take a deeper dive at ICEF2015

The 2015 Executive Forum will feature a session, The Specialist Channel 2025,  which will explore these trends and opportunities from an MGA and insurer perspective.  Heather Masterson, President of Totten Group, a leading Toronto based MGA will be joined by Sean Murphy, President of Lloyd’s Canada, and Kareem Sandid, Chief Actuarial Officer, Totten Group.

This is a must attend for insurer executives interested in the MGA channel.  We look forward to seeing you August 31, 2015.