How to navigate 3 trends reshaping the MGA market
According to a recent research study by Conning, 1,000 MGAs are responsible for writing nearly $70 billion in direct premiums. This number is predicted only to grow, further highlighting that the MGA market is experiencing some of the fastest changes on record within the property and casualty (P&C) insurance industry.
As the market evolves, industry professionals must stay informed and understand the landscape’s trends. Here are three of the biggest trends rippling through the MGA market and what it means for your business.
Excess and surplus continues to grow exponentially
The excess and surplus (E&S) insurance sector is witnessing phenomenal growth, with some estimates suggesting a 20% year-over-year increase from the largest E&S insurers. This growth is primarily driven by the need for specialized coverage in niche markets addressing unique and emerging risks, like social inflation, severe weather, and cyber risk. This rapid expansion is set to make the E&S space one of the fastest-growing insurance sectors to date.
Interestingly, only a small number of MGAs are addressing this growth, which underscores the need for increased efficiency to handle the surge in demand. MGAs must adopt innovative strategies and technologies to remain competitive while maintaining underwriting discipline and managing the potential for increased risk exposure. MGAs can do so by streamlining their technology under one umbrella to leverage the most up-to-date data across all systems.
Speed to market is outpaced by speed of response
In today’s fast-paced insurance market, MGAs must consistently deliver value to their policyholders, with speed being a critical differentiating factor. Historically, the focus has been on speed to market and an insurer’s ability to enter new and emerging markets and write policies quickly. However, thanks to the rapid expansion of the MGA market in recent years, the emphasis is shifting toward speed to response.
Quickly analyzing and leveraging data is crucial for staying ahead of competitors. With vast amounts of data available at their fingertips, insurers are now challenged to extract actionable insights, identify market opportunities, write policies, and underwrite risk efficiently. MGAs that fail to adapt and improve their response times risk losing market share and relevance—a proverbial death sentence when faced with higher scrutiny of capacity and delegated underwriting authority.
MGAs must embrace digital transformation and invest in advanced analytics, artificial intelligence, and automation to enhance market speed and response. By harnessing these technologies, especially within a unified platform, MGAs can streamline workflows, make more informed underwriting decisions, and provide faster and more personalized customer experiences.
Parametric insurance becomes the new frontier of insurance
Much like how cyber insurance made significant waves on the market, parametric is the next type of coverage poised to be an insurance game-changer as the industry evolves and new product offerings emerge to address the ever-changing risk landscape.
Parametric insurance pays out claims to policyholders based on predefined triggers, such as natural disaster severity or weather events, rather than relying on traditional indemnity-based claims assessments. This innovative approach offers numerous benefits, including simplified claims processes, faster payouts, and reduced disputes. These benefits can dramatically rewrite what it means to create a positive policyholder experience.
Parametric insurance is particularly relevant in the context of climate change and increasing natural catastrophe risks. By providing efficient and transparent coverage solutions for these risks, MGAs can establish themselves as pioneers in this new frontier, creating unique value propositions for their policyholders and even offering coverage in hard-to-place markets.
However, parametric policies are only effective if they accurately measure the specific event or condition they are designed to cover. To capitalize on the opportunities presented by parametric insurance, MGAs must invest in the necessary technological infrastructure, forge partnerships with relevant data providers, and develop specialized underwriting expertise. By doing so, they will be well-positioned to navigate this emerging market and offer cutting-edge solutions to their policyholders.
The MGA market in the P&C insurance industry is experiencing significant changes, driven by trends such as growth in the excess and surplus space, prioritizing speed to response over speed to market, and the emergence of parametric insurance. MGAs must remain agile, continuously innovate, and embrace digital transformation to stay ahead of the curve. By understanding these trends and adapting accordingly, MGAs can thrive in the face of change, capitalize on new opportunities, and ultimately deliver exceptional value to their policyholders.
