Managing general agents (MGAs) and innovation go well together. A combination of resources, agility, and specialist knowledge sets MGAs apart from other players in insurance, whether carriers, wholesalers, or brokers. An MGA typically has a focus on a sector or an industry and deeper knowledge than a more generalist insurance carrier, facilitating innovation. At the same time, MGAs have underwriting and claims settlement capabilities that brokers and agents do not have, allowing the MGA to push the innovation envelope further.
While there may be no method for “innovation by numbers,” MGAs can:
- Offer innovative products to their market;
- Move into new markets;
- Innovate in the way they interact with their customers;
- Improve the way they operate internally;
- Change the DNA of the MGA.
We look at each of these possibilities below.
Innovative products for MGA markets
An MGA that does not know what its customers need is unlikely to innovate successfully. Nowadays, there are considerable amounts of data on customer requirements and pain points, including for niche markets. Business intelligence and data analytics software solutions are available for non-technical business users, meaning that MGAs are not obliged to hire armies of data scientists to get insights out of their data.
MGAs can use their power and agility to keep pace with industry trends such as pay-for-use solutions. For instance, even in the niche market of aviation, manufacturers are already selling jet engines on a per-usage basis. MGAs can then follow on with usage-based insurance (UBI), using the device data collected via the Internet of Things (telematics via the IoT). A similar approach exists for automobiles. UK geolocation company Telefleet recently launched a new MGA specializing in motor insurance and vehicle fleet risk based on telematics.
Moving into new markets
Insurance has a large amount of untapped potential. The US insurance market overall generates more insurance revenue than any other country, yet still shows comparatively low rates of premiums per head of population. In another example, insurer Swiss Re estimated that just 1% of losses were insured in the 2015 Nepalese earthquake, compared with 73% for the 2012 New Zealand earthquake.
Forward-looking MGAs also approach markets from other angles with offers based on micro-insurance and atomization. In these cases, customers can purchase insurance on a per-item, per-use, and per-period basis. In another example from the UK, Zego offers insurance for the ‘gig economy’. With this kind of solution, Uber and Lyft drivers can purchase cover by the hour, Airbnb and Homestay renters by the night, and TaskRabbit and Askfortask jobbers by the day.
Improving interaction with customers
Blame Amazon (among other service leaders) for customer expectations continuing to rise in terms of choice, responsiveness, self-service, and overall quality of service. Yet once again, MGAs that are on the ball can turn such situations to their advantage. In India, L&T General Insurance Company offers property and casualty insurance to individuals and enterprises, but with a difference. Given the widespread use of mobile phones (some 800 million in India at the last count), the company ‘went mobile’ from the start, designing in the ability to satisfy customers for their insurance entirely via their mobile phones.
Other insurance companies have taken a lead from supply chains and retailing organizations by implementing an omnichannel model. Whether by mobile, web, phone or email, they offer the same customer experience with consistent policy pricing and management. Speed and quality of service can also be enhanced by the suitable use of chatbots and artificial intelligence. Insurance provider Lemonade has already made a name for itself through its use of AI for its chatbot Maya and claims bot AI Jim for high-speed automatic claims settlement.
Rejigging internal operations
Innovation is not necessarily about doing something fundamentally new. It can also simply be a different approach that gets better results. Artificial intelligence is a case in point. Initially seen as highly disruptive and even threatening, AI is increasingly considered to be a tool to help employees work better rather than to replace them. Software start-ups like Logical Glue in the UK have been developing ‘explainable AI’ (XAI) that helps staff with recommendations about which insurance policies to offer a customer and gives information about the reasons behind the recommendations.
MGAs that innovate in products and markets also need flexible internal systems, such as Insly, that make it easy to define and launch new products, as well as processes for managing and leveraging innovative ideas. Yet whether the innovation is disruptive or progressive, the agility of many MGAs allows them to transform their operations and move to new, more efficient operating models more easily than their larger carrier counterparts.
Building new kinds of MGAs
There is also a more radical way to innovate. Creators of MGAs can change the way in which the MGAs are formed or integrated to take on new risks. BOXX Insurance, an InsurTech MGA from Canada, offers its customers a cyber protection platform and risk evaluation tool in addition to selling them cyber insurance. Buzzmove in the UK provides its customers with removal services and associated insurance that it sources automatically through the API of its tech partner Insly.
Black Insurance from Estonia uses blockchain technology to connect brokers and MGAs directly with capital. Instead of looking to an institutional carrier to help finance the products, funds can be raised via initial coin offerings (ICO). Black Insurance sees blockchain as a way of rebuilding the existing Lloyds of London business model with considerably lower operational costs for all parties involved.
The proximity of MGAs to their customers makes them well placed to create and develop suitable new insurance products. They can also extend current activities into underserved areas or adapt characteristics such as granularity (article by article insurance) and term to reach new markets.
In some instances, MGAs can bring innovation into insurance by using ideas in existence elsewhere. In others, they will need to manage changes specific to the insurance sector, such as the possible replacement of carriers by pools of investors or even by customers themselves in peer-to-peer arrangements.
Technology will still be a means to an end and not the end itself. A customer-centric approach will continue to be vital. MGAs that understand the difference and can apply the principles in the right way should have a bright future ahead of them.
Original Article Published by Insurance Canada