In spite of the challenges COVID-19 posed on the insurance sector, the MGA market is somehow still positively going through 2021. According to a recent survey done by Clyde & Co
- A majority of MGAs and carriers expect an increase in competition for capacity and quality.
- However, two-thirds believe that their relationships will remain the same or increase.
- Half of the carriers surveyed think that the COVID-19 impact will be neutral or positive for MGA capacity.
Smart MGAs see opportunities they are ready to take in 2021. For instance, they have already started getting more inquiries and are writing more policies, capitalizing on becoming responsive to brokers, especially in a market driven by more cautious carriers.
However, as you cannot call anything perfect, MGAs’ professional lives are imperfect, filled with challenges they need to meet in order to improve exponentially. So, let’s discuss the same one by one.
Challenges Impacting Today’s MGAs & Insurers
The Uncertain Marketplace
Most insurance lines are experiencing some capacity challenges due to the pandemic, primarily liability in transportation and construction. Adding to this is an increase in reinsurance rates, a trend continuing in 2021 too.
Many MGAs and carriers in the sector either have not been through a hard market in the past or are unaware of what a hard market seems like. In order to tackle this challenge, they need to learn about the hard market, its impact, and how to build and deliver better solutions to clients, even in a complex marketplace.
The Impact of COVID-19
We all have seen the impact of the recent pandemic on the world and the insurance sector. As a result, a lot of changes had to be made to for MGAs need to consider. Moreover, with continually increasing Covid cases, carriers are dealing with an increasing number of claims, insurance agency management is becoming more difficult, and MGAs are getting a whole lot of workloads as more people are buying insurance.
To meet those challenges, it is recommended to improve operational models. MGAs can be in constant touch with insurance distributors, helping them and brokers as much as they can during the sales phase.
Recruitment – The Bigger Challenge
A lack of skilled human resources can be significant challenge. Because this can lead to inefficient performance, productivity, and diminishing revenue.
Many insurers, MGAs, and MGA agencies have not set up a business model to foster hiring and onboarding in a crisis situation like the current. Hiring people with some years of experience in insurance can be advantageous for niche MGAs; however, it can impact the highly competitive insurance recruitment landscape. Most MGAs are okay with investing in people having specialization in an insurance line.
Things don’t stop here; another challenge in MGAs’ professional life is onboarding employees. It isn’t easy to get new employees to adopt your company’s culture over a video conference. Virtual training is also a considerable challenge.
A solution to these challenges can be pairing up new people with employees working for years in the company. This will ensure they always have someone having their back in case of confusion or revision of the onboarding manual.
The Not-So-Easy Process of Embracing Technology
MGAs may find it difficult to handle multiple functions, especially when having complex risks at hand. Besides, it may also become difficult to determine which technology to use for which operational area, adding to the already challenging technology adoption process.
Many MGAs put together data manually. They don’t either have enough knowledge of technology utilization in insurance processes, or they know what to use but lack the funds to invest in the most suitable technology.
A straightforward solution here can be first to determine the processes for which they need technology’s assistance. Then, they may look for technology service providers to choose the one that suits best with their requirements. MGAs embracing technology are likely to gain better control over their job responsibilities and manage to underwrite more efficiently.
What are MGAs doing and can do to help the insurance sector make a better future?
A Slight Shift in Focus
With the rapid growth of independent MGAs, the MGA market has unlocked considerable growth over the last few years. Moreover, by embracing technology, today’s MGAs are thriving. However, as the pandemic continues its impact, the MGA market has slightly slowed. Consequently, MGAs are shifting their focus from solely commercial lines to personal insurance products.
With that said, excellently performing MGAs are obtaining growth while new industry entrants are taking advantage of the market growth and new distribution partners, channels.
Technology Adoption is the Need of the Hour
Many insurance companies are using outdated systems, which are costing them a significant amount of money. Whereas, many forward-thinking MGAs are recognizing the utter need to adopt InsurTech and taking advantage of the opportunities modern technology offers.
Insurers need technology to assess risks faster and more accurately. Tech has also allowed MGAs to underwrite niche product lines economically. It is not only helpful in managing processes effectively but also in handling and having better control over the underwriting process, reducing costs, all things necessary in a highly competitive market.
Developing a Mindset Capable to Transform Processes
Insurance professionals often see MGAs as an expensive part of their organization. Therefore, MGAs need to change this identity by being able to make qualified changes for the better. This can include making the best possible use of technology or fostering new working cultures. Both these and similar things are essential for today’s MGAs striving for long-term growth.
The Bottom Line
Insurers often find it challenging to obtain optimum underwriting capacity, and many end up struggling with no sound results. However, the market will continue to be uncertain. And insurers are under immense pressure to minimize reinsurance costs for a few lines. Amidst all this, MGAs can take the initiative to transform processes and work cultures by assessing market trends.
MGAs can be the change-maker in the sector, encouraging progress, but this can be made possible with the right technology, human skills and expertise.