{"id":77914,"date":"2025-01-23T14:00:00","date_gmt":"2025-01-23T19:00:00","guid":{"rendered":"https:\/\/staging.majesco.com\/?p=77914"},"modified":"2025-11-06T09:52:49","modified_gmt":"2025-11-06T14:52:49","slug":"mgas-and-the-changing-insurance-landscape","status":"publish","type":"post","link":"https:\/\/staging.majesco.com\/?p=77914","title":{"rendered":"MGAs and the Changing Insurance Landscape"},"content":{"rendered":"\n

MGA growth has been hot the last few years!  Why is it so exciting to be an MGA in today\u2019s insurance market? How can MGA\u2019s benefit from modern insurance technology to facilitate profitable growth?<\/p>\n\n\n\n

If you’re familiar with Instagram, TikTok, or YouTube, you’ve seen the growth of new channels for marketing in action. It’s a popular route to reach new markets, especially for retailers with reduced brick-and-mortar locations. Williams-Sonoma, for example, the kitchen and home retailer, is supplementing their traditional channels with more social media marketing through platforms such as Instagram.  <\/p>\n\n\n\n

Williams-Sonoma still handles its traditional sales channels, including its web presence, extremely well. It is mature in its use of data and shrewd in its ability to keep prices where it wants them. They currently use AI and e-mail marketing to keep track of individual shoppers and the products they are considering. As most retailers do, it grapples with a decrease in its brick-and-mortar locations.<\/p>\n\n\n\n

Williams-Sonoma is, however, capitalizing on trends in social media marketing. They partner with influencers and other brand partnerships to widen their reach and show their products in real-world use. The result is that their products get sold through other sites and storefronts, often placing them in front of markets they had no access to before. They have proven that if you can’t spread your existing brand net \u2014 add more nets.<\/p>\n\n\n\n

Brands that expand demand<\/h2>\n\n\n\n

Managing general agents are the new, sought-after nets. It’s difficult to overemphasize the impact MGA\u2019s are having on the insurance industry. For those who recognize there are necessary changes in the insurance industry for insurance to remain relevant, MGAs hold the keys to both relevance and profitable growth. Whether they are going solo with one insurer or they are partnering with multiple insurers to grow within their niche \u2014 MGAs are all part of a trend toward reaching the previously unreachable. They are using niche expertise and placement opportunities to provide coverage — often for unique risks that demand specific products, whether traditional of new. <\/p>\n\n\n\n

Traditional insurers find greater flexibility and choice in partnering with managing general agents, rather than establishing their own dedicated insurance operations for niche business segments. McKinsey noted in a 2022 article that “among the top 100 U.S. property and casualty insurers, 43%\u2014including seven of the top ten\u2014have at least one MGA insurance relationship through which to source new premiums.”[i]<\/a><\/p>\n\n\n\n

In the AM Best report dated May 22, 2024, they note that in 2023, direct premiums written (DPW) generated by MGAs grew 8.6% year-over-year to $77 billion, following robust growth in 2022 of 19.5% and 17% percent in 2021, demonstrating the importance of MGAs in the insurance market.[ii]<\/a>  The 2024 annual MGA report by Conning further notes that the MGA market will continue to outpace the broader property-casualty market in terms of growth, primarily due to MGAs\u2019 appeal to both talent and capacity providers.[iii]<\/a> <\/p>\n\n\n\n

AM Best further noted that<\/strong> many insurers are using a hybrid model and have some programs managed by MGAs, with in-house underwriters managing other programs, helping to grow premium market share through MGAs. <\/strong><\/p>\n\n\n\n

Further supporting this growth is the access to capacity and capital from new funding approaches, including insurance-linked securities, collateralized reinsurance, reciprocal exchanges, insurers, reinsurers, and private equity.  The growth is a recognition of the market opportunity for MGAs to help insurers and reinsurers grow their premium, expand into new markets and geographies, leverage underwriting expertise, and leverage a new business model and technology foundation that offers greater speed to market capabilities — with a goal to meet the risk needs of a changing marketplace and closing the protection gap of consumers and businesses. This makes MGAs attractive to both top talent (from underwriters to technology professionals) and capital from private equity companies for startups.<\/p>\n\n\n\n

Well-timed MGA growth and advancement<\/h2>\n\n\n\n

With the growing volatility of risk, insurers pulling out of markets, and increased insurance exposure across many lines of business, MGAs and E&S products are uniquely positioned to meet these challenging demands. MGAs are innovating and creating new digital business models that provide new products and experiences for customers, particularly for those in volatile risk markets.<\/p>\n\n\n\n

Majesco’s recent research assessed strategic priorities for MGAs \u2014 from the business through technology \u2014 and weighed these priorities against insurer priorities from Majesco research earlier in the year. We look at how these priorities align (and diverge) to give both insurers and MGAs a better picture of how they might best prepare to partner. Read the full report, MGA Strategic Priorities 2024<\/a>, for a complete view from both sides of the partnership fence. <\/p>\n\n\n\n

MGAs\u2019 strong customer relationships, robust business and technology foundations, and specialized expertise for risks and underwriting differentiate them in the market, providing insurers and reinsurers with risk management expertise they may lack within their organizations.  This makes MGAs strong first movers in a rapidly changing world of risk. The research highlights MGAs\u2019 sharp focus on operations and technology, and their forward-thinking leadership that drives optimization, growth, and long-term business innovation.<\/p>\n\n\n\n

As the insurance market continues to adapt and evolve, winners will be aligned to today’s realities\u2014MGAs focus on unique, complicated risks, and insurers and reinsurers on the partnerships they establish with MGAs.  Accomplishing this requires a foundation, both operationally and technologically, to achieve operational optimization, cost-effective scalability, and agility to adapt as risk and market needs shift through innovation.<\/p>\n\n\n\n

An MGA snapshot<\/h2>\n\n\n\n

The breakneck pace of change, particularly with emerging risk and technology, is challenging strategies and plans of MGAs\u2019. As InsurTech has matured and advanced, and private equity has accelerated investment in MGAs, we are seeing the value of first-mover status.<\/p>\n\n\n\n

Whether bringing new products to market, expanding to new niche markets, or leveraging data and analytics, and technology, managing general agents demonstrating strong growth, expanding insurer and reinsurer relationships and market presence are taking advantage of first-mover status. They have strengthened business fundamentals and technology foundations while meeting the challenges of a changing market, as seen in Figure 1.<\/p>\n\n\n\n

Last Year and the Next Three Years<\/h2>\n\n\n\n

When comparing last year to the next three years, MGAs are shifting their focus from business as usual to creating the business and technology foundation needed to compete in an increasingly shifting and complicated world of risk.  This requires expanded use of data and analytics for assessing and underwriting risk. It requires new products, and native cloud core solutions to meet the demands of a different operating model and channel network. <\/p>\n\n\n\n

Figure 1: MGAs’ assessments of their business last year and expectations for the next three years<\/p>\n\n\n\n

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The 2024 Conning report reinforces this focus, with MGAs indicating the abundance of market opportunities, but with an increased need for specialization and nimbleness to effectively serve a growing number of niche markets emerging due to increasing and shifting risks. This will allow MGAs and their partners to capture market share. <\/p>\n\n\n\n

MGAs need to expand their ability to be nimble, specialize, and leverage their underwriting expertise effectively. <\/p>\n\n\n\n

The right investment across key areas makes a substantial difference in growth. Those focused on and investing in replacing legacy core, creating new products, defining new business models, expanding channels, reallocating resources to the future business, and innovation initiatives report significantly higher growth than those who do not \u2013 from 1.16 to 1.98 times difference. See Figure 2.<\/p>\n\n\n\n

Not surprisingly, new products and product changes as well as innovation stand out \u2013 two areas of unique strength for MGAs. <\/p>\n\n\n\n

Figure 2: Higher engagement in strategic activities leads to stronger growth<\/p>\n\n\n\n

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Top-of-Mind Issues<\/h2>\n\n\n\n

The insurance market is facing many headwinds, driven by heightened volatility in financial markets, economic activity, and an increased risk environment. Navigating this uncertainty is not for the faint of heart. It requires leaders to diligently execute their strategy and adapt where they need to remain relevant and competitive in this fast-changing market landscape.<\/p>\n\n\n\n

Reflecting this new reality in Figure 3, MGAs\u2019 top-of-mind issues reflect market challenges regarding their business model and technology foundation being out of step with a new reality taking hold.<\/strong> Operations, technology, and economic issues are the top three categories, with the other four not falling far behind. <\/p>\n\n\n\n

These results align with the Conning report, which found that:<\/p>\n\n\n\n