Why MGAs could be the future for regional brokers

Whether it be Brexit, GDPR or the IDD, the UK’s regional brokers are facing the prospect of some big changes over the coming years and months.

Helen Devery, partner at law firm BLM, says some key regulatory and legislative changes will have a particularly big part to play in the future of brokers across the UK’s regions during this period of change.

“Changes in regulation and legislation including GDPR and data protection create compliance and increased due diligence for brokers,” she says. “There is a requirement now, more than ever before, for brokers to demonstrate they have control over their data, particularly as in the first month of it being introduced we saw the Information Commissioner’s Office record a sharp rise in breach notifications and complaints.”

Devery adds that brokers will also be required to move to a more consultative role in the future, and it is here that fellow BLM partner Alex Traill says MGAs can really help regional brokers.

“MGAs can help regional brokers overcome certain key challenges while at the same time promoting their own interests,” he says. “By providing the regional brokers with niche products that can often more ably satisfy individual client requirements, MGAs also provide brokers with the ability to discuss risks directly with an individual underwriter who has the authority to make decisions, which is often not the case when brokers deal with larger carriers.

“This enables the broker to be more fully informed, given their direct access to the underwriter, and should allow the development of the broker adopting an additional consultative role given the more exposure they have in the discussion of risks directly [with the underwriter].”

Charles Manchester is the chief executive of Manchester Underwriting Management, or MUM as it is affectionately known, and has also been the chairman of the MGA Association (MGAA) since 2016. He says that the entrepreneurial nature of MGAs makes them ideally placed for underwriting niche product lines where expertise is key.

“MGAs are the route of choice for entrepreneurial underwriters for setting up insurance businesses,” he says. “While 20 or 30 years ago they might have set up an insurer or a Lloyd’s Syndicate, the barriers to entry are now much higher than they used to be with regards to regulatory capital requirements.

“MGAs are also a way for specialty and niche businesses that believe they can add value to the insurance food chain to exist as underwriting operations. Insurers often find those niche lines difficult or not desirable to operate in particular niche lines, and MGAs often have the expertise in niche areas that insurers just can’t replicate.”

A £6bn marketplace

The MGA market is a growing sector in UKGI, with MGAA members now writing more than £6bn in premiums every year, making the sector an increasingly important distribution channel for brokers to tap into.

Manchester will soon be presenting at a MGAA-run Meet the MGA event in Bristol, and says that brokers need to make the effort to meet their MGA partners so they can better understand the benefits of doing business with them.

“It is important for brokers to come and see MGAs, meet them and ask them face-to-face what they do, what value they add and what they can offer them,” he says. “There are some extremely good MGAs that offer specialist expertise in niche lines of business that insurers just can’t deal with so well, or they are able to offer a quicker, more entrepreneurial approach than insurers who have been cutting costs and just don’t have the experienced people of 20 to 30 years [like a lot of MGAs do].”

Tim James, chief executive of Ensurance UK, says that the regional broker market has a rich future ahead of itself, and that MGAs are committed to helping such brokers do the best for their clients.

“A good MGA will have the right underwriting capability to provide the right products,” he says. “From a distribution perspective, MGAs can be more committed, so brokers can see the value of a MGA. We don’t have a responsibility to work with every brokerage in the UK that comes to us, we can support the brokers that add value and build a relationship that benefits both the broker and the customer, and of course the MGA.

“The regional broker market is a key part of our distribution strategy. We are a niche technical underwriting business, and we know from our experience that the regional market remains strong and the quality of clients that are represented by those brokers [is high]. It is essential that those brokers have access to ambitious underwriting agencies to deliver the right products and knowledge to ensure those brokers can provide their customer with access to a growing and important market in the UK.”