Brokers Are Still Indispensable for MGAs
The demise of insurance brokers has been predicted many times over the years, as new technologies and business models have threatened to cut them out of the insurance value chain. For MGAs and insurers, digitisation has transformed the distribution landscape, making selling direct more accessible, via websites and apps, and through embedded insurance solutions. Yet, despite these developments, brokers are stronger than ever.
The truth is that brokers continue to offer numerous benefits to MGAs, many of whom are doubling down on their broker networks by using automation and AI tools to streamline the whole process. So, why do brokers continue to rule insurance distribution?
They still own most of the market
While customers may be comfortable buying direct for relatively straightforward consumer covers, most insurance is more complicated. Customers want specialist advice, and access to the whole market to ensure that they’re getting the best price and cover for their needs. This is only possible through an independent broker.
As a result, insurance brokers still control 33% of the personal insurance distribution landscape and an incredible 82% of commercial insurance businesses in the UK. And far from declining, the insurance broker market is increasing in size, growing 8.8% annually to £21.7 billion over the past five years – a trajectory that is predicted to continue.
Brokers do MGA’s marketing for them
Now that any MGA can build a self-service website relatively easily, selling direct to customers can seem like a smart approach. With no commissions to pay out, on the surface it appears like a lucrative option, enabling MGAs and insurers to own the whole customer relationship to drive cross-sell and upsell opportunities, as well as renewals.
However, selling direct is often more complex and costly than it might seem, particularly the marketing required to drive sales. From online and offline advertising to brand strategy, marketing automation, and personalisation tools such as chatbots, not to mention customer service agents and call centres, it can all add up quickly.
In contrast, working with brokers means that they handle a lot of this marketing, including capturing the right target audience, educating customers on the market, and then selling products. Brokers also have existing networks they can draw on, giving MGAs a shortcut to a ready customer base.
Looking out for the customer
Consumer duty regulations, which came into force in July 2023, mean it is more important than ever to ensure that consumers are being sold appropriate products. The rules state that customers should be “sold products which provide valuable benefits at an appropriate price, that they receive the service and support promised or to be reasonably expected.” All insurance companies need to be able to demonstrate how they are focused on delivering good customer outcomes.
Selling through brokers – particularly independent brokers – is a key part of ensuring customers are fully informed about insurance products and getting the best deal. Brokers are specialists, they know their customers inside out, plus they have a whole view of the market, which means that they can sell the most appropriate policy to each customer at the best price – thereby helping to ensure a good outcome.
They free up underwriter for product innovation
When choosing distribution channels, MGAs should also consider their internal resource and the best way to maximise their time and expertise. Selling direct can be a big drain on an MGA team’s time, which will inevitably take their focus away from other areas, such as new product development, and managing capacity relationships – both of which are also critical to success. In contrast, as brokers do a lot of the heavy lifting in client attraction and retention, this frees up the team to focus on activities where they can drive the best long-term value.
Streamlining broker relationships with AI and automation
Selling through brokers is a no-brainer for most MGAs, and with new AI-powered tools, such as Insly’s FormFlow, they can remove the broker submission bottleneck, so brokers can submit customer and risk details in any format, including Word, PDF, email, or even handwritten notes, to be processed by quote and bind systems. This eliminates the need for brokers to enter data manually into numerous MGA systems and ensures underwriters have the data they need in the required format. Insly estimates that it can triple MGA’s broker submission processing power, ultimately helping to boost sales.
Plus, with a comprehensive low-code platforms such as Insly, MGAs can maximise these relationships further by setting up a customised broker portal, where brokers can retrieve quotes, documents, sell and amend policies from one dashboard. The platform also offers a fully tailored policy administration system (PAS), allowing MGAs to control broker access, commission rates, and payment processing all in one place.
Every MGA must decide on the best balance of distribution channels for them, whether that’s brokers, direct, embedded insurance – or most likely a mix of all three. But whatever combination they choose, the right technology will ensure it all flows seamlessly – for MGA’s and their partners.
