Managing general agents (MGAs) are increasingly interested in working with insurtech firms to enable their businesses to become more customer-centric, according to a new survey of UK MGAs.
More than 42 percent of survey respondents feel insurtech helps MGAs evolve their business model to be more customer-centric, a leap of over 20 percentage points from 2017, said a survey of 26 members of the London-based Managing General Agents’ Association (MGAA), called MGAA Matters.
Conducted in June 2018, the survey focused on MGAs’ views on the opportunities and relationship with insurtech, the potential impact of continuing uncertainties around Brexit, and the future shape of the MGA sector over the next decade. MGAA Matters is a research-based partnership between MGAA and MGA formation platform Castel Underwriting Agencies Ltd.
The survey found that respondents’ view on the benefits that MGAs can bring insurtech start-ups has strengthened with just over 42 percent now saying MGAs deliver underwriting expertise that is still lacking, compared to just over 28 percent last year.
The survey found that the number of MGAs considering the development of an insurtech strategy has increased by 13 percentage points from 25 percent in 2017 to over 38 percent in 2018.
Levels of understanding about the opportunities that insurtech offers has also increased. Less than 4 percent say they are not clear on the opportunities, compared to over 12 percent last year. The numbers who are not actively considering investing in insurtech remained static at around 12 percent, the survey found.
Brexit and MGAs
Respondents were asked how the continuing uncertainty around the UK’s Brexit plan was affecting MGAs. Just over 23 percent of those writing European business said the availability of capacity or plans with capacity providers was the main impact. Nearly 20 percent cited concerns about future regulation costs and compliance, which 15 percent expected a detrimental impact on pricing and product development.
The concerns of distribution partners about MGAs’ ability to meet their needs after Brexit was identified by nearly 12 percent of respondents, and just under 8 percent indicated they were delaying or unable to make decisions on growth or development plans.
Despite the uncertainty, many MGAs have already prepared for Brexit. Over 23 percent of respondents indicated they already had a Brexit strategy in place and more than 30 percent said they were working with their capacity provider(s) on a plan. Less than 8 percent said they would wait until there was greater certainty on Brexit before developing a strategy.
Looking to the future, MGAs were asked for their views on what the main features of the sector might be over the next decade. There was optimism about growth potential, with over 57 percent saying they expected the number of specialist and niche MGAs would increase. More than 38 percent felt MGAs would be at the forefront of addressing emerging risk and new products. The same number said there would be a greater diversity of capacity provision.
The move by insurtech firms to become MGAs would be a feature according to nearly 35 percent of respondents, while close to 31 percent said consolidation in the sector would see fewer MGAs.
“This latest survey highlights how MGAs are willing and able to adapt to the new and emerging dynamics of the market,” said Peter Staddon, managing director of the MGAA.
“The uncertainty of Brexit and the shape of the future trading environment is a challenge for many,” he added. “The government must take into consideration the significant investment in time and resources businesses are making in trying to prepare. Greater clarity around what the future will look like is important to ensure these actions have not been in vain.”
“The survey shows that MGAs show increased confidence and determination to use the opportunities that insurtech can bring,” Castel’s CEO Mark Birrell said. “The future success of MGAs and insurtech is interdependent, and for this reason increased optimism in the sector should be welcomed.”
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