This article was first published by Modern Insurance Magazine and has been re-produced here with their permission. You can read the full article here: https://bit.ly/3SxnQBW

In keeping with the theme of this edition, Modern Insurance Magazine is delighted to present its readers with a series of perspectives and insights from some of the key names in our sector. In answering a series of questions around the subject of MGAs and TPA partnerships, growth strategies, and the imperative role of technology in an ever-expanding market, our panel indulges us with the perfect opportunity to unpick the intricacies of the MGA industry.

• Michael Keating, Chief Executive Officer at the MGAA
• Chris Butcher, CEO – Intermediary Services at Davies Group
• Paul Howard, Head of Coverholder & Alternative Distribution at AXA XL
• Tim Hardcastle, CEO and Founder at INSTANDA
• Paul Templar, CEO at VIPR

The typical MGA claims model includes partnering with a TPA. What needs to improve within this relationship to ensure the best class customer outcomes?

Chris Butcher at Davies Group is the first to respond, stating that it is ‘essential to continue the development of new solutions and technology’ to guarantee success within a partnership. ‘MGAs and TPAs have to work together, remain flexible and create new ways of working to achieve good customer outcomes.’

He adds that ‘we’re seeing businesses work with fewer partners’ within the industry to ‘maximise the value of their investment in strategic partnerships, improving customer happiness and protecting costs.’

Mike Keating of the MGAA provides further context, claiming that ‘effective communication between all stakeholders needs to be at the heart of all claims delivery’. Mike also feels that ‘greater focus on the claims relationship – and the responsibility of each stakeholder – needs to be applied at the onboarding stage’ to make the most out of the partnership.

Paul Howard from AXA XL agrees with Mike around the importance of communication, stating that open communication ‘is essential between all parties,’ with the customer being ‘regularly informed regarding progress.’ He continues, ‘ultimately, we’re here to pay claims – so claims handling services provide the best opportunity to prove the worth of the product and can be a key differentiator when exemplary service can be proven.’

Paul Templar at VIPR observes that ‘when an MGA partners with a TPA, the claims data and the risk data aren’t readily available together. When this data is available, it’s supplied in ways which make it difficult for the MGA to ingest and process. We can help in bringing all that data together into a central data repository, wherefrom sensible decisions can be made using the insights available.’

Paul also believes that this method would ‘facilitate better informed future claims decisions, as well as the underwriting process.’ Ultimately, this holistic view of data ‘allows MGAs to provide a much better service to their customers, as they can see the full picture and take the correct steps earlier on in the process, rather than searching for insights further down the line.’

What tools do MGAs need to fuel their growth strategy, and how is this assisting them with new broker partnerships?

Mike begins by emphasising the critical importance of ‘a clearly identified risk appetite’ to attract the right brokers, and subsequent ‘enquiries for both existing and new broker relationships. He also includes ‘service excellence, consistency of decision making and the genuine desire to work through solutions to challenging risks’ as key tools for MGAs to develop their growth strategy.

Chris agrees that ‘controlling the service and customer experience’ forms a key advantage for MGAs in broker partnerships, ‘because they can provide a level of service which can’t be matched by the incumbent.’ Whilst the tools deployed can be technology related, most common methods utilised by MGAs ‘are common sense, business relationship processes’ when it comes to creating and managing new broker partnerships.

Paul Templar also addresses the use of technology, stating that ‘technology solutions will really help growth strategies to accelerate moving forward. It can be challenging to get up and running with a new business, but those trying to start on a shoestring, collecting data on Excel or similar, aren’t going to be equipped to the same level as those who invest in the right tech from the start.’

In terms of partnerships, Paul believes that technology is playing two primary roles. Referring to services like ‘automated quotes, buying solutions and policy issuances, collating data in real-time means that a lot less manual intervention is required.’ This means that more data is being analysed in less time, leading to ‘better informed underwriting decisions being made and increased profitability’ across the wider market.

In addition, Tim Hardcastle at INSTANDA observes that ‘MGAs will increasingly have to raise their standards when it comes to user experience, in much the same way that other industries have for their brokers and end-customers. At a high-level, MGAs need the ability to create relevant, focused propositions, and the ability to provide these to their brokers/customers in a smooth, user-friendly fashion.’

Tim also adds that ‘brokers are increasingly finding ‘off the shelf’ products to be less relevant, even for the ‘lower’ end of the commercial market. This means they’re reverting to MGAs with a need for dynamic policies which mould themselves around the needs of the client, without having to spend weeks waiting for an underwriter to manually assess the risk and create something bespoke’

Paul Howard adds a final point to reiterate the bespoke nature of the MGA role, stating that ‘any tools which could improve the ease of doing business with MGAs, and the extent to which their internal processes are improved, is vital. The improvement of efficiency alongside the automation of processes enables MGAs to concentrate on providing a much more bespoke personal service’ within the supply chain.

As the utilisation of MGAs becomes one of the fastest growing sectors of the market, we see competition increase. How do you continue to differentiate yourself from the competition?

Paul Howard is the first to respond by referring to differentiation through ‘service and solutions’. He goes on to state that MGA’s which ‘adapt to changing market conditions and have capacity from long-term partners’ will be able to ensure an alignment of interest that will allow all parties to thrive, ‘with ease of doing business and continuously reviewing solutions delivered in a highly responsive way’ being vital factors to consider as competition increases.

Mike is also keen to stress that the way an MGA can become diversified from their competition ‘will centre around what has made them different and attractive to their capacity partners,’ using ‘product expertise, service differentiation and access to distribution’ as key examples.

Paul Templar is also quick to address this point by highlighting VIPR’s success in the Delegated Underwriting Market. Paul states that VIPR have ‘a proven track record of helping all parties in the value chain, from the MGA to the broker, right through to the ultimate underwriter.’

Furthermore, he states that VIPR have also increased investment as a tech provider to ‘develop smart products and invest in people, engaging with a community of users to help the company move in the right direction.’  Their team of experts all come from the insurance sector, with many years of experience between them, cementing their ‘unique position as a technology business that’s very familiar with insurance, producing great products that the market really wants.’

On the other hand, Chris confirms that Davies Group ‘provide an incredibly broad set of services to MGAs, brokers and insurers’ instead of acting as an MGA or insurer themselves. In recent years, Davies Group have built their advantage in the fact that they can ‘help clients think about their capital usage more broadly, setting up a captive for them for example, or helping to create a Lloyd’s vehicle such as a Syndicate in a box.’

He goes on to add that Davies Group also ‘work with the insurance market to recruit & retain talent, whilst delivering a whole range of insurance specific technology and consulting solutions to help MGAs, insurers and brokers in strengthening their customer journey’. It is this capability, Chris states, which allows Davies Group to assert a key differentiator in the market.

How can tech, disruptive thinking and creating a culture of innovation help reform and launch businesses? How can tech support MGAs in capitalising on market opportunities?

Tim addresses this point firstly by stating the importance of modern technology in MGA opportunities, using ‘the blossoming of no-code platforms within the sector’ as an example, which ‘has enabled MGAs to embrace the ability to spin up new products and distribution channels at a fraction of the time and cost’ in comparison to legacy solutions. He goes on to state the benefits of this, ‘providing the MGA with the option to ‘fail fast’, which in turn encourages them to trial innovative ideas and propositions whenever they spot a gap in the market.’

Mike supports Tim’s input by stating that in the absence of legacy systems, MGAs ‘can absolutely embrace new technology and capitalise on opportunities.’ He also refers to the key role of Artificial Intelligence (AI), predicting that it will adopt a ‘growing influence in the MGA sector, in underwriting as well as in operations.’

Paul Templar provides a final comment by confirming that VIPR have ‘seen the vital importance of getting the right technology and the right products in place very early on.’ MGAs face quite a challenge when they retrofit a solution after they have already started trading, ‘especially if they have to migrate data that has already been captured on a different system, or from simple databases like Excel.’

Paul goes on to reiterate that from his experience, success comes from businesses which ‘have gone through that vendor selection; they’ve thought carefully about the sort of systems they needed, looking to technology providers who set them on the right path.’ This way, they are able to implement the right processes on day one and find their feet much quicker as a result.

The market continues to see new Insurtech MGA entrants demonstrating state of the art technology. With the recent unfortunate demise of Honcho, where should Insurtechs shift their proposition to ensure more longevity?

Tim insightfully answers this question in depth with a focus on longevity. INSTANDA believes that ‘longevity is a consequence of true product-to-market fit,’ so ‘in this sense, Insurtechs should try to ensure that their product is born out of, and aligned to, a specific need or opportunity that they have identified – rather than being created as a funky new piece of technology which is then pigeon-holed into a particular use-case to commercialise it’.

On the other hand, Tim adds that there are plenty of Insurtechs with good product-to-market fit, yet they have struggled when turning this into a successful business model.  When asked about common issues in this capacity, he highlights the following three points:

• Growing too fast. If securing funding and investment is a tough task, then knowing how to spend this wisely is an even tougher task. For some Insurtechs, the ‘scale up’ phase of their life cycle has been challenging, and this is often down to a lack of established structure and process internally.
• Target ‘market’ is too small. If the total number of potential clients to win is not enough to support the ongoing costs and maintenance of the Insurtech, then this can become problematic further down the line.
• Standing still. The Insurtech world is incredibly fast-moving, and so what may be a fantastic product one day may be less so the next. There is no place for ‘resting on your laurels’ as an Insurtech, regardless of the success you’ve had. There needs to be a focus on what your clients may want next year, in three years, or even in five years.

Paul Howard is next to support the involvement of Insurtechs within the market, stating that this ‘is a natural progression of evolvement within the sector’. He goes on to state that ‘the proliferation of start-ups coincides well with the innovation that the MGA sector displays’, supporting this by stating his belief in ‘developments that will ultimately lead to changes across the market, with all players – including established MGA’s – adopting technological enhancements to improve their offerings.’ Therefore, Paul doesn’t necessarily see this as creating two distinct areas of the MGA market, but rather a natural progression within the industry where the strongest players are able to thrive.

In a final point to conclude the forum discussion, Mike draws upon his knowledge as CEO of the MGAA to add that ‘the quality and agility of new tech is not under question’. However, is enough focus being applied to distribution? What about the way in which the product is promoted, and the way that customer segments are targeted? He leaves us with a parting sentiment; ‘there is little point in having a fantastic customer centric system without any customers!’

If you would like to continue the conversation, get in touch with CEO of Intermediary Services UK, Chris Butcher at chris.butcher@davies-group.com