MGA Startup Story: How to Build a Successful Insurance Start-up?
What is it that defines a successful MGA entrepreneur? John Holm, Executive at MGA Investments at Asta Underwriting Management Ltd, says that perhaps the most important factors often cited for the ideal MGA start-up entrepreneur are someone who is good at both insurance underwriting and insurance distribution as well as having a good grasp of the numbers, however few are really good at all three, although often one person does take on the entire job alone.
Whilst an underwriter’s skill makes them ideally placed to assess the profitability of the business they are shown, they are not trained as managers. Brokers, who are also often the main drivers of a MGA start-up because of their excellent distribution and selling skills, often find that the qualities that make high achieving brokers are not exactly the same as those of a good CEO.
So the challenge is to forge together the required mix of attributes, of those capable of making money in the insurance business with the vital managerial skill of running a successful enterprise.
Story of an MGA start-up Tapoly
My name is Janthana and I’m the CEO of Tapoly. Although I was born in Thailand and grew up in Sweden, I am a Londoner at heart. My values are based on the best principles of both worlds, East and West – I should work hard, be responsible for myself, and respect the society that I live in.
When I came to London I had my suitcase and £300 cash in my pocket, and I had to take two jobs to get myself through University. Sixteen years later I’ve created wealth for myself, had a successful career in finance, and now I’m pursuing my dream of becoming an entrepreneur. So, I know all about hard work and the importance of being tenacious and dedicating myself to my ambitions.
Tapoly will offer on-demand insurance services for the sharing economy. The goal is to make sure that everyone in the sharing economy has access to a comprehensive insurance solutions Tapoly is currently looking for capacity partners and we will soon start our fund-raising process. Below, I’m going to share with you some of the things I’ve learned so far.
Based on your experience, what are the main things investors evaluate when deciding whether to invest into a MGA (Managing General Agent) or not?
Generally, investors care about three things when considering a start-up:
· PRODUCT – Is there a need for the product? What are the potential customers currently doing to solve their issues? How does the product solve these? What is the route to market? How big are the margins? Is the Total Addressable Market growing? What is the projected market size and growth? Is the IP defensible? Would a market leading position be defensible?
· TEAM - The 4 C’s. Is the team Complete, Committed, Compatible and Complementary? – Can the team deliver on promises, is there a skills or knowledge gap and have they worked together (preferably successfully) before?
Most angels and VCs would prefer to keep in contact for a while before investing, so that they can monitor growth of KPIs and ensure that the concept has been proven.
Ideal investors are those who can get involved and add value beyond simply just their capital. This can be through their network, sector knowledge or their specific skillsets. They should also have a good reputation and ideally be respected by other investors who may want to join as the project progresses. However, the reality of most start-ups is that seed-stage businesses can’t be too fussy about whom they get money from.
When talking to investors, what are the main things an MGA NEEDS to have in place in order to raise capital?
A new start-up MGA would need to demonstrate the following:
· That they have obtained capacity to underwrite
· System capabilities
· A license from the appropriate regulator (in the UK, this is the FCA)
· Routes to market
This can be a chicken and egg situation because many of us need to raise sufficient funds before securing the above. In practice however, it involves taking small steps on many fronts at once and continuing until everything falls into place at the same time.
Where would one go about finding investors for an MGA?
For finding investors, my primary strategy is to reach out to people who I already know, and ask them to advocate on my behalf of me and the business. I let them be my ambassadors and introduce me to their network. Then those new people I meet can introduce me to more people, and so on in an exponential way. Attending industry specific events is useful for meeting key influencers and building relationships. Finally, I may also consider using crowdfunding platforms.
What would be your top 3 recommendations when starting a new MGA?
My recommendations would be:
· Design the products you want to sell and find carriers who will be willing to back you.
· Make sure you are clear on how to bring your product to the market and know who your target audience are.
· Get angels and VCs involved as soon as possible so that they can track your development.
It may sound straightforward, but in reality, it takes time to validate a concept, and it’s even more difficult to get a carrier to back you, as most carriers don’t want to give away their authority to underwrite on day one. At all stages, building relationships is crucial.
It’s still early days for Tapoly, but we will keep an eye on their story and share their success very soon.