MGAs and Their Rising Challenges due to Covid-19

Last updated: 29 Feb, 2024 By | 6 Minutes Read

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The COVID-19 is posing certain challenges at MGAs that must be overcome to ensure sustainability. Let’s check the opinion of market players on these challenges.

The influence of COVID-19 on the insurance industry has highlighted the importance of firms embracing information sharing and collaboration, from the increased cybersecurity dangers of a remote working environment to the increasing occurrence of fraud during a period of financial turmoil.

Market Players Speak: MGAs’ Ongoing Scenario Challenges Unveiled

Let us check what the market players have to say about the MGAs challenges they have been encountering due to the ongoing scenario.

1. Wide Generation Gap

Trisha Beausaert

Trisha Beausaert | TMD | CEO of TruStar, Daniel Moses

The unique challenge facing MGAs today is the generational divergence of the underwriting talent pool. Baby Boomers are retiring en masse and are leaving behind a conservative and mostly-analog culture to a progressive and digitally super-charged cohort, known as Generation Z.

To win under these conditions; organizations need to see this as the perfect opportunity to evolve a traditional business model in order to serve today’s challenges and opportunities.

To stay ahead, recruit the 20 and 30 somethings who come with highly technical skill sets and hordes of new ideas to underwrite, deliver and service insurance policies in the ways expected by brokers and policyholders in the 21st century.

2. Establishment of Trust

Lee Grant

Lee Grant | CEO at Wrangu

In any market, neither professional knowledge nor the best technology guarantees success. In my opinion, any MGA’s success begins with gaining the trust of its insurance carrier. However, gaining trust is only the first step; it must be maintained, which requires consistency.

The MGA must perform year after year in line with predicted premium income and profit & loss estimates to maintain trust. Because all successful MGAs rely on solid and long-term relationships with carriers, finding the proper personnel is the most challenging task.

3. Increase in Claims Cost

OliviaTan | Co-founder of CocoFax

There have also been questions about whether or not claims expenses will increase over this time period. One key thing that research has flagged is that going into a period of recession and economic hardship is likely to impact the number of fraudulent claims that need to be defended against.

Business people actually face a few obstacles. However, there is a scope of new opportunities accessible for the insightful MGA, which is open and able to novel thoughts. The extraordinary thing about MGAs is that they are versatile and can zero in on spaces of strength along these lines.

Also Read: How Insurers Handling Claims Challenges with Modern Solutions?

4. Communication Barrier due to Remote Working

Alex Magnin

Alex Magnin | CEO and Founder of Alexmagnin

Today, MGAs face a number of challenges, including the trend of remote working, since their model relies on connecting with policyholders and brokers – and they have had to find ways to do so as smoothly as possible. So, there is a need for a degree of automation while keeping a good balance of the human element. But the great thing about MGAs is that they are adaptable so that you can focus on a particular area of speciality.


5. Fragile Market Conditions

Thomas Fultz

Thomas Fultz | CEO and Founder of Coffeeble

During this time, MGAs are experiencing an unprecedented challenge, a very agile moment in my perspective. However, in the current difficulties, we believe that MGAs will find their own position as they are experts in evaluating the market and consulting on how to react to changes.

Moreover, the capability to give resilient advice will help them and their clients get over a hard time. Having said that, capacity matters here. To come up with a plan which is not cliché, and most importantly, works for their clients, it needs a maximum capacity of excellence to prove the money spent for them worthy.

6. Need for Innovation

Shane Page | InsureTech Collaborator

Shane page

MGAs were under innovation pressure prior to COVID, but like many other industries, COVID significantly accelerated the need for modernization. Many MGAs have done a fantastic job and built their businesses on a service culture and relationships with their agents. This gives them a distinct advantage against tech startups and shiny new MGA brands, but loyalty has practical constraints in the modern economy.

All innovation pressure comes from consumer expectations. Agents may prefer to continue doing business with the same MGAs, even if new options with faster automated quoting are popping up. However, agents may not exclusively determine the success of MGAs.

The consumer race to instant gratification is probably a bit overstated by tech startups and hype machines- especially for E&S and more complex risks, but this doesn’t mean things can stay the same. For example, suppose a customer can choose between a professional expert who can answer questions and deliver quotes online or via email in a matter of minutes. On the other hand, there’s another professional expert who takes days to provide a quote. Which one do you think gets the edge?

More to the point, if an MGA has a niche program, it is highly likely that the manual quoting and underwriting process could be mostly or entirely automated very cost-efficiently…AND if the industry leader doesn’t automate it, there is an open door for a competitor to make gains. The whole sector of niche programs is ripe for automation. The intake process is typically very specialized and specific. Rating variables are usually minimal (less than 10-15) relative to highly sophisticated modelling in generic home, auto, and BOP products popping up left and right.

Someone will inevitably recognize the opportunities that result from inefficient processes. The people closest to those processes are in the best position to optimize and grow exponentially before competition creeps in. Electronic submission and quoting processes are well within any MGA budget and capacity. The days of 6 and 7 figure investments in technology platforms are gone. MGAs can do what they need to do with the resources they have and a little guidance. All that is required is the will and the courage to change.

The Bottom Line

Despite the hurdles created by COVID-19, the attitude in the MGA market remains upbeat as the year passes. In actuality, the outlook for the MGA market for the following year is binary. We anticipate that stronger MGAs would do better. They have their house in order and ‘control’ their area. They can deliver for brokers who can no longer always gain the attention of underwriters. Large MGAs will see this as an opportunity to boost capacity and accelerate growth.

Smaller players, on the other hand, with bad claims records or large spending ratios, may struggle to demonstrate their worth. A good piece of advice for them would be to take the assistance of virtual insurance assistants to manage operations efficiently.

After reading the suggestions and recommendations provided by different insurance experts, we should know that the road ahead might not be harsh. However, seeking expert assistance is necessary to maintain the pace. Therefore, many insurance agencies are taking assistance of virtual insurance services to achieve their desired goals in a stipulated time.

Taking external assistance not only aids in project completion but also in cost-cutting. You can discover highly qualified services at reasonable prices, allowing you to reduce your overhead considerably.

Similarly, Insurance Support World provides high-quality services at lower prices to assist insurers in getting through these difficult times. We offer a wide range of insurance back-office services all over the world. Contact us to know more about how we can help your insurance business mitigate the effects of COVID-19.

Call us at +1 646 688 2821 or send an email at [email protected].

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