MGAs take up tech tools in battle for relevancy

“If you build it, they will come”. 

Loosely attributed to the 1989 Kevin Costner film Field of Dreams, this phrase – popular in business terminology – suggests that creating a quality product alone is enough to reap rewards in terms of customer attraction and retention.

However, in the world of insurance technology, Polo Managing Agency and PoloWorks chief executive Paul Andrews said that this approach has mostly failed – “specifically in the telematics or broker portal spaces”.

And while that mindset “may work in very rare niche instances”, in most cases it “ignores several key factors necessary for success”, he added.

So, amid a surge of technological advancements and new data usage in the sector, how can MGAs ensure that their innovations remain relevant?

First and foremost, Andrews said the “foundation of good technological breakthroughs” centre on the “insurance need behind it”, supported by market research and an understanding of customer needs.

“Simply building [a product, service or platform] without thoroughly understanding what your target audience wants is risky”, he added.

Meanwhile, Anders Hjelm, head of delegated business and deputy chief executive at SiriusPoint International, believes MGAs which “truly understand innovation have not always been driven by consumer preferences”.

Instead, he suggested that innovation is about figuring out what consumers will be seeking in the future.

“Leading companies do not ask what their customers need, but instead try to envision how technology can be used in the future,” he said.

“In the same way, forward-thinking – and profitable – MGAs look at meeting future insurance needs rather than always looking to solve immediate issues in the market.”

Technological challenges

One challenge that has become apparent in the MGA market is determining how to leverage and embed technology effectively, while also keeping in mind the bigger insurance picture and purpose.

A common pitfall here, according to Xceedance’s vice-president and client executive for southern Europe, Isabelle Clausner, is firms’ “reliance on a single technological solution without a comprehensive strategy for implementation”.

She said: “Often, startups founded by tech enthusiasts may introduce cutting-edge tools – such as Internet of Things driven products – without a clear understanding of how these tools fit within the broader insurance framework.

“This disconnect can lead to failure if the MGA lacks the necessary insurance expertise to support its innovations.

“Conversely, MGAs formed by underwriting experts may excel in understanding risk, but struggle with technology adoption.”

Collaboration

To bridge this potential skills gap, business partnerships and recruitment become even more important.

Clausner, for example, said that partnering with established tech firms or insurtechs that have the necessary expertise can enhance MGAs’ offerings and allow sector firms to integrate innovative technology while also focusing on core competencies.

However, she warned that this approach required investment and firms without sufficient funding “may find it challenging to scale their operations effectively”.

Jonathan Pflieger, senior vice-president of insurance products at insurtech Inari, highlighted that the operating models and data that MGAs often use today offer a “certain degree of flexibility” when working with third party vendors.

As an example, he said: “For an MGA, this might entail working with a tech vendor to develop a workbench with embedded underwriting business rules, connected to a digital placement platform that facilitates smart lead data analysis.

“That helps the underwriter to determine faster whether or not to write a lead line or smart follow an automated process of accepting syndicated policies which match specific criteria.”

For MGAs writing lines of business such as cyber, Pflieger said firms can monitor “the pulse of the market” by using third party integration to enrich risk data at policy level, as well as monitor the evolution of cyber risk scores.

Artificial intelligence

Andrews added that “the current flavour of the month” concerning technology is artificial intelligence (AI) and machine learning (ML).

However, “don’t go out and start building your large language models just yet”, he warned.

“I say this because you will never be able to spend enough. Instead, leverage the newest versions of third party tools currently available,” he said.

“Your organisation is probably already using ChatGPT, Copilot, or similar tools and as tech companies develop these tools, they will make serious inroads into increasing productivity and reducing operational friction.”

Meanwhile, Hjelm said there are “few MGAs” leveraging AI, which he finds “surprising”.

“It is no doubt because we are a conservative industry and the push for tech driven MGAs has cooled,” he continued.

“But AI is only one piece of the puzzle to ensure that MGAs are giving the market the innovation it needs.”

One MGA that is exploring the use of generative AI in its quest to remain relevant is Rising Edge. It is using this technology to develop sentiment analysis on directors’ and officers’ (D&O) risks.

Philippe Gouraud, chief executive at Rising Edge, said: “The essence of MGAs is to bring something different to an established market.

“Without innovation, an MGA offers no differentiation and will inevitably only be able to compete on price, everything else being equal. And these are stories that never end well.”