Growing Together: Aligning Insurer and MGA Priorities

It’s Thursday morning.

You have just launched another project, and you need your team to create a new and innovative product. You were only able to secure two talent resources to begin the project. One is a new hire, five years out of college or university. The other is an industry veteran who has been with your company for 27 years and is five years away from retirement. In many ways, the pairing is the best of both worlds: the new hire will provide energy and some knowledge regarding the newest ideas and methods for building out the product. The cautious expert will be realistic and keep things in line so that the company doesn’t incur undue risk during the project.  

The biggest question that has to be asked, how do they work together?

The veteran is pragmatic and process-driven. Fixing internal systems and prioritizing the right kinds of changes that will give them a viable, broad-market product that can be trusted.

The new hire is collaboration-oriented. Networking and partnerships will give them the right kinds of channels to reach new markets right now. They just need some budget and support. It can be a niche product. They can expand the product line if it works.

Both have great ideas, but can their strategies and work styles mesh to create a formula for success?

This is the MGA and insurer relationship – whether affiliated or unaffiliated. When it works, there’s nothing better. What is the glue that can keep the MGA and insurer collaboration on track?

The key is for MGAs and Insurers to understand the strengths of each other, then find commonality in the crucial spaces, such as technology, risk, product, and operations. The “perfect match” is made when organizations truly want to be successful with each other. If each organization does not fully align on key strategic areas, the result could be a short-lived insurance partnership, impacting both organizations and their partnership long-term.   

To gain insight into the alignment or differences between MGAs and insurers, Majesco compared key areas from the MGA Strategic Priorities 2024 Thought Leadership. Within the P&C market, the relationship between insurers and MGAs/MGUs is closely intertwined – from access to capacity to distribution partnerships, customer relationships, and product innovation. In an increasingly complex world of risk and technology, MGAs help insurers grow premiums, expand into new products, markets, and geographies, augment underwriting expertise, and innovate. 

Because MGAs operate independently and use core and other technology solutions for their business, their technology is increasingly crucial to effectively partner with and conduct business with agents, customers, and insurer partners. The flip side is also true. For insurer partners to optimize their MGA partnerships, they need to prioritize their ability to support MGA data and operational integrations.

The Case for Partnership

The price of alignment is well worth the results, as MGAs and insurers can use this relationship to learn and drive growth.  With the challenging headwinds facing the P&C industry, driven by economic activity and an increased risk environment, navigating them requires leaders to diligently execute on their strategy and adapt where they need to remain relevant and competitive. 

If MGAs and insurers can successfully integrate new technologies into their respective operations, they will be more effective at expanding product and market capabilities that help diversify risks and risk appetite effectively. Most importantly, by doing so, MGAs’ and insurers’ alignment enhances business agility, improves the ability to attract new business, and meets customer demands and needs.  

Top-of-Mind Issues

In comparing their top-of-mind issues, the top three categories of operations, technology, and economics are fairly aligned both in priority and ranking, as reflected in Figure 1. However, differences appear in the next three categories, with MGA priorities focused on customers, risk, and talent as compared to insurers focused on talent, customers, and then risk.  Not only are these categories prioritized differently, but the rankings are significantly different, with MGAs profiling them higher than insurers.

Overall, MGAs appear to be focused to a high degree on all these categories. What’s interesting is that the competitive differentiators of product, underwriting, and channel relationships that drive profitable growth are reflected in the top 5 categories. While talent is a key differentiator, particularly for underwriting, MGAs are not facing the level of talent challenges that insurers are or will as retirements continue. 

Figure 1: MGAs’ and insurers’ Top-of-Mind issues

Based on a 10-point scale where 1 meant “Not at all” and 10 meant “Very much”

Strategic Initiatives

The strategic response to the business priorities really deviates between MGAs and insurers, both in terms of the categories, but also in rankings, as reflected in Figure 2. While both have the optimize category on top, MGAs’ focus is heavily skewed to areas of differentiation – ecosystem of partners and innovation of new products and markets. In contrast, priorities for insurance are also focused on optimizing with an ecosystem of partners, but they are heavily prioritizing internal transformations ahead of innovation focus.

In some ways, this misalignment could be construed as a match. Insurers may be looking to their partners and MGAs for innovations while they improve business optimization.

Decades of operational and technology legacy debt for insurers have placed them in a position where they must transform and optimize. The patchwork of legacy solutions, coupled with increasing retirements and loss of institutional knowledge and skills, and a new generation of employees who will not work with legacy technology, legacy debt is becoming more of a major operational risk for insurers, impacting their short and long-term competitiveness and growth. MGAs with legacy debt should take note and adjust their strategic focus to eliminate it as quickly as possible to achieve and maintain a competitive position and relationships in the market.

Figure 2: MGAs’ and insurers’ Strategic Initiative priorities

Based on a 10-point scale, where 1 meant “Not at all important” and 10 meant “Very important”

The MGA rankings and differences to insurers reinforce an assessment in the AM Best report that notes that insurers struggling to transform and innovate can benefit from MGA relationships, their entrepreneurialism, and technologies to gain a competitive market advantage.

Which activities can be linked to growth?

While the insurance market is being challenged and reshaped by technology advancements, customer generational shifts and expectations, macro-economic factors, new competition, new risks, and increased regulatory demands, growth is very possible with the right strategic focus, as reflected in Figure 3. However, the impact is vastly different between MGAs and insurers.

Higher growth is achieved by MGAs with new products, their key competitive differentiator, as compared to replacing core systems by insurers, one of their biggest challenges. New business models and reallocating resources are generally on par. Surprisingly, expanding channels and innovation outpace MGAs, two areas that are their competitive differentiators. 

Figure 3: Increases in Growth Last year by Companies with Higher Levels of Engagement in Strategic Activities vs. Those with Lower Levels of Engagement

While the impact on growth for the key areas may be different, this highlights the hidden value for insurers to select the right MGAs to extend their growth plans in areas where they lag behind.

Important MGA and Insurer takeaways

• MGAs’ strategic initiatives outpace insurers to transform, optimize, and innovate.  
• MGAs significantly outpace insurers on market growth initiatives and new, innovative products.
• MGAs leverage distribution strength and outpace insurers with a multi-channel focus.
• MGAs are further behind in replacing legacy solutions, putting them at a disadvantage to insurers or new MGA startups leveraging next-gen intelligent solutions.

While MGAs’ strengths are product, distribution, and innovation, to keep those at the forefront, they must reevaluate their core systems and implement next-gen solutions that will strengthen their competitiveness in these key areas today and in the future. For insurers to truly maximize their relationship with MGAs, they must:   

• Insurers with strong MGA relationships should continue to expand and leverage them. Insurers who have not partnered with MGAs should strongly consider doing so.
• Insurers can find greater flexibility and choice in partnering with MGAs– leveraging them to innovate and test new products and markets.
• Insurers can take advantage of MGAs’ product acumen to test new products and markets cost-effectively.
• Insurers that only focus on the independent agent channel are limiting their market reach and running the risk of losing business with agents who may shift to MGAs.
• Insurers can use MGAs to capitalize on market opportunities to drive growth.
• Insurers can evaluate new business models through the MGA partnerships.
• Insurers can offer customers a broader portfolio of risk products to meet their changing needs and demands if their processes and technology are ready to partner with MGAs.

Win-Win Alignment

MGA and Insurance partnerships provide some exciting growth opportunities for both parties and for the insurance industry. Taking advantage of the partnerships, on either side, teams will want to consider partner ideas and the capabilities they each bring to the table.

Majesco is at the forefront of preparing MGAs and insurers to take advantage of MGA channels and products, and insurer capabilities and support. Check out Majesco’s P&C Intelligent Core, P&C CoreConnect, and P&C Enterprise Rating solutions, and be sure to check out yesterday’s Majesco webinar, Driving Risk Resiliency to Navigate Today’s Complex Property Risk Landscape.