Is it possible for MGAs to become too mainstream?
While Managing General Agents (MGAs) say their firms are here to stay, their competitors are discussing whether the specialty underwriting market is oversaturated.
The topic arose in response to an audience question about whether the industry acknowledges the role MGAs play in the market, during a panel discussion at the Insurance Brokers Association of B.C. (IBABC) AGM and Leader’s Conference in Whistler, B.C.
“MGAs are always going to fill a rut,” said Jason Storah, CEO of Aviva Canada. “The problem in this industry is everybody has started an MGA, and they’ve got way more mainstream than ever was the purpose behind their [origin].”
MGAs tend to underwrite the specialized risks that primary carriers may not cover. Thus, brokers can expand their insurance options for clients by placing business with MGAs — especially during hard markets where coverage gets rolled back or becomes pricier.
But the competition for primary carriers is growing.
In 2021, Canadian MGAs were expected to grow their premiums between 20% and 60% year-over-year. Currently, about one out of two policies placed by brokers in the commercial and specialty space is with an MGA, Steve Masnyk, executive director of the Canadian Association of Managing General Agents (CAMGA) previously shared with Canadian Underwriter.
However, competition from all types of carrier channels is a good thing — and some panellists echoed the phrase “rising tides float all boats.”
“There’s enough room for competition in this industry,” said Storah. “There’s enough room for insurers to consolidate brokers…[and] for insurers to have other distribution channels — and everybody on this panel, and lots of other insurance executives, really support your business and want you to grow…”
As another insurer observed, the specialized nature of MGAs has changed over time.
“There’s a whole host of brokers that own MGAs and use it for a different reason than what we participated in program business 15-to-20 years ago, and wrote it in different fashions,” said Graham Haigh, senior vice president and COO, West, at Wawanesa Mutual Insurance Company.
However, it’s about quality over quantity when it comes to carriers, specialty or otherwise, another panellist added.
“The one thing that we’ve learned in the last two or three years of our experience with MGAs is it’s all about quality,” said Paul Jackson, COO at Gore Mutual Insurance Company. “What I encourage [brokers] to do is be judicious about where you’re placing business.”
Amid a hard market, terms, pricing or capacity may be less favourable through one carrier than the next one. But long-term contract outcomes should be the priority for brokers, Jackson suggested. “Build strong relationships where you know there’s quality underwriting, and there’s quality claims delivery going on, regardless of whether it be through a specialty or primary carrier.”
As Paul MacDonald, executive vice-president, personal insurance at Economical Insurance put it: “Let competition compete.” MGAs’ value proposition falls in their ability to fill a coverage gap in the market, he explained.
“If we’re going to outsource one of our core competencies [by] using an MGA, it would be because we’d be looking for some expertise that we don’t have,” MacDonald said. “We’d have to trust and evaluate whether they’re deploying that expertise wisely,” and the same goes for brokers looking to contract MGAs.
For primary carriers, competition serves as a reminder to stay up to par with their service levels and quality product delivery, said Debbie Coull-Cicchini, executive vice-president, Intact Insurance.
“That’s a prod at us to make sure that we’re giving you the service that you need…and giving you the product solutions you need,” he said.
“But more competition is coming into Canada other than MGAs,” Coull-Cicchini predicted.
Feature image by iStock.com/Andrii Yalanskyi
