Brokers Are Still Indispensable for MGAs
Many have predicted the demise of insurance brokers, as various innovative insurtechs have tried to cut them out of the value chain. For MGAs, digitisation has expanded the distribution landscape, including selling direct, and through embedded insurance solutions. Yet, despite these channels being more accessible, 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 technology to streamline the whole process. So, what makes brokers so important?
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 an incredible 67% of all general insurance businesses and 81% of all commercial insurance businesses in the UK. And far from declining, the insurance broker market is increasing in size, growing 5.7% between 2018 and 2023 - faster than the finance and insurance sector overall - a trajectory that is predicted to continue.
Brokers do your marketing for you
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 you 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 for you, including capturing the right target audience, educating customers on the market, and then selling your products. Brokers also have existing networks they can draw on, giving you a shortcut to a ready customer base.
Looking out for the customer
With the new consumer duty regulations coming into force in July 2023, it is more important than ever to ensure that consumers are being sold appropriate products. The new 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,” From this summer, all insurance companies will 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 your team 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 your team’s time, which will inevitably take their focus away from other areas, such as new product development, and managing your 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 your team to focus on activities where they can drive the best long-term value.
Streamlining broker relationships with technology
Selling through brokers is a no-brainer for most MGAs, and with no-code platforms such as Insly, you can maximise these relationships by reducing administration and driving efficiency. With Insly, MGAs can set up a customised broker portal, so brokers can retrieve quotes, documents, sell and amend policies from one dashboard. The platform also offers a fully tailored policy administration system (PAS), allowing you 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 you choose, the right technology will ensure it all flows seamlessly - for you and your partners.