A managing general agency (MGA) traditionally provides focused marketing, underwriting, and binding insurance services on behalf of an insurance carrier, while that carrier provides the insurance paper for which those specialized risks are written. MGAs are not new to the market, but there is renewed interest in them and in deals with them by carriers and investors. MGAs can provide carriers with additional reach into niche markets without the overhead costs associated with recruiting, training, and retaining marketing and underwriting personnel. Plus, as MGAs these days are preferring more to house and own the data, they are increasingly open to taking on additional technology costs.
The point about owning the data is a direct driver to what is happening in the MGA market, with a recent article in Carrier Management reporting on the growing carrier-like business practices like rate-making, compliance, and, of course, technology. However, with the advent of data science, analytics, and other emerging technology, MGAs are realizing that they hold tremendous value in the data that they gather if they provide the technology to market and underwrite insurance policies, as opposed to using their carrier partner’s systems to underwrite and bind and then requesting and waiting for when copies of that data arrive, if they ever do. By investing in their own infrastructures and pursuing carrier-like strategies, such as increasing their digital, data, and core capabilities, they, too, can leverage the value gained in servicing insurance processes and, more importantly, owning the data.
The article points out that the direct written premium for MGAs grew from $24.8B in 2013 to $35.1B, excluding crop and California Earthquake Authority premium, and it now accounts for 17% of US commercial lines premium, up from 5% in 1999. It also reports on the increase of investments in the MGA markets.
The renewed interest of carriers in utilizing the MGA market and the associated growth of MGAs over the past few years will continue to grow. MGAs who are behaving like carriers will seek to leverage technology and data to further expand value in their companies that will continue to fuel investments into the MGA market. For MGAs, this means investing in core systems, data strategies, and digital capabilities.
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