By: Luke Jones, Published on July 30, 2017 02:12 PM, Last Update on July 30, 2017 11:14 AM
Managing general agents (MGAs) have an advantage of normal insurance providers as they are able to react to market changes more rapidly. That the assessment of Gary Hurst, president and CEO of CHES Special Risk.
“MGAs can be a lot more innovative in terms of product application because the reporting lines in an MGA are usually fairly short, whereas with an insurance company they are extended and often involve a treaty agreement. This trend is actually driving more business into the MGA market,” Hurst told Insurance Business.
He added: “Insurers have been consistently losing money for a number of years. This doesn’t have a great deal to do with the underlying performance of the book (losses versus premium). A lot of it is because of high expense ratios. If you look at the UK market, there are a large number of domestic insurers that I would now call ‘virtual insurers’ in that they’re giving their capacity to MGAs who are providing the service of underwriting, reporting, premium collection and claims payment. An MGA is able to deliver those services far cheaper than the insurer can. It’s in the insurers’ interests to delegate their capacity to an MGA because they can cut down on their acquisition cost and the cost of doing business.”
While the rate of delegation in Canada is not as high, there is “room for growth”. Currently in the country, there are 90 professional MGAs who cover a consumer base of 35 million people. In the UK, there are already 1,600 MGA, covering a consumer base of around double Canada’s.
Hurst explained: “Embracing tech and online trading is the obvious next step. As clients get more and more used to buying their personal insurances online, as in auto or home insurance, I think brokers will become more used to visiting an MGA’s web portal and quoting the business direct, especially as margins are getting thinner and thinner. If we can provide brokers with an online offering which cuts down the amount of time it takes to quote and buy a piece of business, that’s got to be good for everybody.”