The Future of Insurance: Why MGAs are Key Partners in the Hard Market

As the insurance industry faces challenging market conditions, managing general agencies (MGAs) or underwriting agencies, are becoming increasingly important partners for insurers. According to a report by law firm Clyde & Co, 45% of carriers surveyed expect their MGA partnerships to increase this year. The report also highlights that the economic climate has not had a material impact on capacity allocations, with carriers signaling that expertise, data, and technical expertise are key factors they look for in MGA partners.

MGAs, or Managing General Agents, are intermediaries in the insurance industry who have the authority to underwrite policies, bind coverage, and manage claims on behalf of insurance carriers. MGAs act as a bridge between insurance companies and insurance agents or brokers, providing specialized expertise and services to bring insurance products to market.

Here are some key characteristics of MGAs:

  1. Underwriting Authority: MGAs have the authority to underwrite and issue policies on behalf of insurance carriers. They evaluate risks, determine coverage terms, set pricing, and issue policies based on their delegated underwriting authority.
  2. Distribution Channel: MGAs typically work with insurance agents or brokers to distribute insurance products. They have established networks and relationships with these distribution channels, leveraging their expertise to reach specific markets or niche segments.
  3. Specialization: MGAs often focus on specific lines of business or industries, allowing them to develop deep knowledge and expertise in those areas. They may specialize in areas such as commercial property, professional liability, cyber insurance, or niche markets like entertainment or sports.
  4. Claims Handling: In addition to underwriting, MGAs may also handle claims on behalf of insurance carriers. They manage the claims process, including investigating, evaluating, and settling claims, ensuring a smooth and efficient claims experience for policyholders.

The MGA model is particularly attractive in Australia, where there are many new players entering or seeking to enter the market. The MGA route is a good way for London-based capacity to gain access to this market, particularly to write SME business. Lines like cyber are also generating a lot of interest.

Despite the challenges, MGAs are well-suited to write lines of business that will remain both disciplined and profitable in the coming months. The report suggests that carriers will likely focus on wordings and rate adequacy and be reluctant to supply capacity for certain lines. However, MGAs have invested in data and tech, and this investment is likely to be bearing fruit as their models evolve.

More MGAs than carriers have invested in tech or Insurtech in the past year, with 80% of MGAs having made such an investment compared with 55% of carriers. This investment is likely to pay off as MGAs continue to evolve their models and use data and tech to empower good risk selection.

“MGAs have invested in data and tech, the survey showed, and this investment is likely to be bearing fruit as their models evolve.”

At Riskwolf, we funderstand the importance of data and tech for MGAs. That’s why we enable insurers to build and operate parametric insurance at scale using unique real-time data and dynamic risk modeling. With Riskwolf, you can turn real-time data into insurance, making the insurance process simple, reliable, and fast

As the insurance industry continues to face challenges, it’s clear that MGAs will play a key role in the future of insurance. If you’re an insurance executive looking to develop parametric insurance for your business, get in touch with Riskwolf today. Let us help you navigate the hard market and build a profitable future for your business.

Source: Insurance News

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