Growing your MGA The tipping point

Growing your MGA

There are more insurtech solutions available than ever before, but if you’ve scaled to the point at which they become useful, how do you choose? James Elliott, MGA Lead at Instanda, offers some timely advice

If you’re an MGA that has been putting off the ‘technology conversation’, then chances are you’ve reached a tipping point – the point at which a series of small changes or incidents becomes significant enough to cause a larger, more important change.

From an MGA’s perspective, it’s when you realise that, to grow your business further, you need to adopt a more comprehensive technology solution (amongst other things) to underpin your operations. What and when depends on the layout of your current processes, the size and capabilities of your team, and the in-house culture you have created.

Drawing on our experience of the MGA market, the ‘tipping point’ is most commonly seen three-to-five years after an MGA has launched, and once it is writing approximately $5-10million gross written premium (GWP). At this point, the organisation tends to be out of ‘startup’ mode and looking to bring new business onboard in a more structured fashion.

As proprietary solutions creak at their seams – and the workload associated with manual policy administration becomes unaffordable – many MGAs find themselves going to market for a more comprehensive technology solution to support and accelerate the next phase of their life cycle.

WHAT TO DO WHEN YOU REACH A ‘TIPPING POINT’

A lot of MGAs will have been aware of the impending need for a more modern software solution for some time. The most common issues that typically lead an MGA to its tipping point are:

Manual underwriting workflows

Without the correct software in place, the underwriting and quotation process can be drawn-out and time-consuming – even for risks that are traditionally less complex. From emailing brokers and double-keying risks, to managing policy information and navigating between spreadsheets to calculate premiums, it’s easy for important information to be lost or displaced.

In today’s world, underwriting doesn’t have to be this way. Underwriters don't even need to be pulled into every application. Insurtech has the capacity to issue instant outputs that could otherwise take hours, if not days, to complete with manual processing. In a competitive market, this can mean the difference between winning and losing new business.

Studies have shown that 47 per cent of internet users will leave a page if it doesn’t load in two seconds or less, so it’s no surprise that insurance customers expect to receive a personalised and affordable quote from their providers, quickly and digitally.

Upon binding in the Instanda platform, custom policies and declaration pages are delivered instantly, with payments scheduled and collected through the automated clearing house (ACH), resulting in electronic audit trails for speed and ease of premium accounting, broker and carrier remittance and painless renewals.

Policy administration systems (PAS)

These are the foundations that underpin an insurance company’s digital strategy. The capabilities provided by a policy administration system can enable an insurer or MGA to fundamentally shift its ability to compete in an evolving digital insurance landscape.

The right PAS is value-efficient, as error-free as possible and gives insurance organisations the resources they need to tweak existing propositions and ensure their product portfolio remains relevant. Broker and customer experiences are also improved by the automation of key processes and the freedom to access new distribution channels.

Scaling a business without a refined PAS – for example, creating new products, onboarding new brokers and sourcing new clients – can be something of a nightmare.

A PAS forms the primary system of record for the vast majority of insurance organisations, regardless of business class or speciality. Maintaining a proprietary in-house PAS (particularly one that wasn’t built in the last five-to-10 years) often comes with elongated lead times for any significant change or progression, and a huge overhead financially, given the cost of software engineering talent. The key to meeting today’s market challenges lies in moving to a flexible ecosystem, of which an integrable PAS will form part.

To achieve high business value from a successful PAS transformation, you will need to look at fresh ideas to combat market pressures and make tough business transformation decisions along the way.

Digital PAS systems guide internal resources to easily complete the policy administration life cycle, only stepping into the process where their skills or expertise are absolutely required. Customers are led through the price quote and application journey with simple and clear questions, allowing the MGA to repeat these processes for each new customer. The cumulative benefits of installing such modern, external PAS systems, boils down to having the ability – and the freedom – to spin up and implement new products easily and at pace. No-code platforms like Instanda provide reliability, availability and security, with the flexibility to roll out new propositions at will, and rapidly make tweaks to existing ones.

Having the ability to grow your business without worrying about the effect on proprietary tech solutions, or the

additional expense of bringing in new developers, allows MGAs and team members to focus on doing what they’re best at – whether that be underwriting, internal collaboration or fostering relationships with clients.

Most importantly, PAS systems stand as a single view of the truth, ensuring that data is readily available whenever needed. Secure and accessible storage of information lets MGAs regularly analyse performance, forecast their future and monitor customer treatment, expectations and outcomes.

Regulations and delivery

Repeated failure to deliver the correct data to the correct stakeholders (e.g. carriers, customers and regulators) will create a very real barrier to an MGA’s success over time. As such, maintaining proper audit trails should be at the forefront of any digital innovation plan – especially when looking ahead to a period of substantial growth.

Insurers and MGAs also rely on their software solutions to help ensure full and effective compliance with growing regulatory demands, maintaining consumer protection and risk mitigation. Agile product testing, such as can be achieved with Instanda , lets MGAs conceive a product, deploy it within weeks and then distribute it to multiple channels in different ways. This enables companies to crystallise their product strategies in a fraction of the time that traditional systems take, without sacrificing any of the security measures that needed to ensure a product is watertight before it goes to market.

So, what should MGAs be looking for? These are five key features an MGA should have on their shopping list when they reach their tipping point and begin searching for technology solutions:

■ Ease of integration ■ Truly Cloud native ■ No-code (i.e. ability to configure products without developers) ■ Flexible workflows and distribution channels ■ A business culture that aligns with their own.

Fortunately, with new generations of innovative software-as-a-service (SaaS) insurtechs becoming more economically viable, the choices available to MGAs are continually improving. Worldwide insurtech funding reached an all-time high in 2021, with around $15.4billion across 566 deals, more than double the funding total for 2020. There are now a plethora of solutions which are targeted at helping these businesses to minimise reliance on rigid in-house solutions, spreadsheets and manual communication trails.

Cultivating innovation and entrepreneurship in an industry that is risk-averse by nature can undoubtedly be tricky, but putting it off could harm your market competitiveness and operational efficiency.

Utilising an insurtech’s automated underwriting services as you grow your business holds the promise of enhanced agency communications, improved tracking, more consistent underwriting decisions and faster throughput – all leading to increased return on investment.

Eighty-five per cent of insurance CEOs believe that the speed of technological change is threatening their companies’ growth prospects. It’s time to start innovating and operating like a tech company: quickly, simply and nimbly.