If 2020 highlighted the capability of MGAs to drive decisions to survive the pandemic, 2023 and beyond are years of expansion. However, we can't overlook the fact that MGAs have seen their fair share of challenges over the years, especially in terms of performance after the pandemic.
Industry experts say, "Growth in the MGA market is expanding faster than the market itself." And why not? Statistically, MGA premiums recorded $60 billion, or 19%, in 2021, a massive increase from $51 billion, up to 6%, in 2020.
Presently, new MGAs are plunging into the market every week, looking for long-lasting partnerships with reinsurance capital to achieve the desired success.
MGAs have transitioned from the mindset of "surviving the pandemic" to "thriving in the market" using the latest technologies.
In the insurance space, technology has been booming over time. Be it the rapid application of big data to explore risk insights, automating and optimizing business processes using Al tools, opting for insurance BPO services, or diving into IoT/ telematics.
Technology sets the trend for MGAs by offering improved digital channels and workflows, innovative core systems, and deep-dive insights into analytics.
No matter the size of your MGA firm, Artificial Intelligence, Machine Learning, and other intelligent tools empower businesses to thrive.
Technology Crossroads for the MGA Market
A few accelerating technology trends are expected to transform the MGA businesses. Let's explore them:
1. Embrace Digitalization
MGAs can opt for various digital tools such as AI, cloud computing, telematics, and chatbots. It will help streamline operations and improve customer experience, saving cost and time.
2. Data Analytics
MGAs often juggle between data at every touchpoint. This is where data analytics can help you optimize your processes smartly. The Analytics dashboard will give you deep insights into your market, agents in several locations, sales, claims, etc.
3. Embrace Innovative Culture
To survive the wave of technology, MGAs have to embrace and foster a culture of innovation in their firm. This approach will help you stay ahead of the curve and empower employees to think creatively.
Technology imposes challenges and opportunities. These technologies are changing how insurance policies are written, priced, and distributed. However, embracing tools is the key to attain success in the changing landscape. Let's see the significant challenges that MGAs face when adopting technologies:
· Changing Customer Needs
Today, customer preferences are changing rapidly. They are looking for a more customized digital experience that MGAs must adapt to survive.
MGAs have to work towards developing new digital capabilities and exploring new distribution channels. So finding the right partner in the ecosystem who can help with seamless digital transformation is a challenge.
· Regulatory Compliance
Another major challenge that MGAs encounter is changing regulations in the insurance industry. Over the years, regulators have been closely monitoring insurance products to protect consumers and ensure market stability.
This is applicable when it comes to adopting technologies. As an MGA, you must ensure that your technologies bind to data regulation.
· Increase Competition
With technology, there is increasing competition. MGAs are encountering tough competition from traditional carriers as well as new players.
Insurance carriers are investing heavily in having their in-house underwriters; on the other hand, InsurTech is developing innovative products and distribution channels.
Hence, MGAs need to differentiate themselves by using the right technology or hiring insurance BPO service providers to save cost, time, and effort.
The MGA market has seen a significant rise in digital MGAs. These often target particular market segments such as property and casualty, small businesses, and homeowners.
Also, digital MGAs are backed by insurance carriers and reinsurers by covering a certain amount of risk on their own balance sheet.
Undoubtedly, MGAs can create significant value through data analytics and other technologies that help to:
· Digitalize distribution via "legacy-free" placement platforms
· Automate pricing models
· Efficient quote-to-bind process
· Streamlines underwriting process
According to John Rowlands, a former broker at Guy Carpenter, it's no longer insurers seeking help for distribution. Instead, even technologically paced MGAs are pushing boundaries and reaching out to carriers that ensure less influence in their business functioning.
· Improved Productivity and Process Efficiency
With automated underwriting processes and claims processing systems, optimizing and streamlining operations become easier for MGAs. Ultimately, MGAs can save maximum time and effort and focus on exploring better business opportunities.
· Simplified Risk Assessment with Data Analytics
Harnessing accurate data and utilizing it to the fullest has improved quality underwriting policies and risk evaluation. Using Machine Learning or predictive analytics enable MGAs to tap into market trends and explore new patterns.
· Enhanced Customer Experience
Technology has become the key driver in disrupting traditional MGA models. Now, customers can use several tools to understand their policy, file claims, or get any information related to the policy.
Customers majorly use chatbots, mobile apps, and various online portals for a better understanding. With 24/7 available information, customers are experiencing a seamless procedure while buying policies.
In a nutshell, the impact of technology is transforming the way MGAs do business and interact with customers. To stay ahead of the curve, embracing new technology has become imperative. MGAs must focus on inculcating the latest technologies, designing innovative products, and eliminating cybersecurity risks.