Insly recently attended the MGAA’s Capacity Exchange Event, and the feedback from the market was that it’s tough out there for MGAs. Capacity demands are on the rise, including the volume of business and profitability insurers expect from MGA partnerships. Delays in securing carrier support mean startups postponing launch plans and established players putting scaling timelines on hold.
For MGAs, securing long-term capacity relationships is critical for scaling products and services and being prioritised by brokers. A study found that the financial strength of an MGA’s capacity partner plays a major role in broker decision-making. But with growing competition, securing and retaining the most sought-after partners isn’t easy.
Upgrading their technology stack is one way MGAs can make their business more attractive to potential capacity partners. The right systems and data ease various elements of the process, including optimising underwriting efficiency, providing real-time oversight of performance, and aiding compliance.
Here are five distinct ways the right MGA software can strengthen capacity relationships:
1. Aiding underwriting discipline
Capacity providers want to work with MGAs that they trust to maintain underwriting discipline and profitability despite market challenges.
“The biggest mistake I’ve seen MGAs make is focusing on topline growth rather than profitable growth, so they start writing cheaply and lose their capacity as a result. That leaves them with a massive problem,” says Scott Brown, Managing Director, Accelerate Underwriting.
Maintaining underwriting and pricing consistency doesn’t happen by accident; it requires the right governance and compliance in place and access to comprehensive data. Technology can help enormously by collating customer and market data in one place and providing access to third-party databases to aid underwriting accuracy.
This gives insurers confidence that your business will maintain consistently high standards and respond quickly as the market evolves.
2. Regular reporting against financial objectives
MGAs at the Capacity Exchange Event reported that periodic reporting on performance via spreadsheets and emails is no longer enough; insurers are increasingly expecting real-time updates from their MGA partners. Modern insurance software makes this easy by seamlessly linking up with insurer systems, giving them constant and real-time visibility of all critical data, including sales, profits, loss ratios, claims, and beyond. This reduces the workload for MGAs, plus increases transparency, giving insurers more control of their revenue streams and enabling open and ongoing communication about optimising sales and addressing any issues as they arise.
Independent Lloyd’s broker, London Marine, says implementing Insly’s finance and accounting system has transformed its capacity reporting.
“Our capacity partners are over the moon because any reports they want, we can generate for them,” says Alex Brown, Director of Growth and Compliance at London Marine. “The fact that it’s all there and we’ve got an almost bespoke system, they’re really happy.”
3. Automating risk bordereaux
Traditionally, MGAs would provide carriers with risk bordereaux files in Excel, however, doing this is cumbersome, time-consuming, and prone to delays, human error, and inefficiency. Open APIs in modern MGA software enable risk bordereaux to happen in a more automated way, so the MGA system pushes all the relevant risk details to the carrier systems as and when the policies are issued. This makes it more timely, efficient, and accurate, significantly reducing the administration burden for both sides.
4. Ensuring they get paid accurately and on time
MGAs have complex accounting and reporting processes, which require them to receive premium payments centrally before distributing a portion of these to their partners, including carriers. As a result, the process is susceptible to human error, including missed payments, double payments, or partial payments, which can make reconciliation a headache and have a serious impact on capacity relationships. The right insurance software, with accounting and reporting functionality designed specifically for MGAs, ensures this is all taken care of. So, less work for MGAs and no more payment errors.
5. Operational efficiency and enhanced profitability
From our conversations with MGAs, we know that many are concerned about meeting ambitious targets from capacity providers for metrics such as volume of business and profitability. And while software isn’t a magic wand, the automation it brings can help MGAs make considerable strides towards meeting these targets consistently by enabling them to scale with fewer people and reduce overheads.
By digitising its workflows and data, Insly client, Accelerate Underwriting, is able to write the same volume of business with three underwriters that it would take a traditional business 12 underwriters to manage. That gives an indication of how the right software, implemented in the right way, can help MGAs achieve the scale and efficiency that insurer partners are looking for.
Standing out through technology
Securing that first capacity partnership, or expanding your roster of carriers can be tough, but with the right foundations and perseverance, long-term, profitable capacity is out there. The right technology is one rapid way of ensuring you stand out amongst the competition.
