The stalled M&A market and increased reinsurance prices of 2023 will not be holding MGAs (Managing General Agents) back this year. In 2024, top MGAs will forge ahead increasing revenue through strategic partnerships, improved customer experience, new and innovative products, and greater operational efficiency. As a result, investment in technology will be a linchpin for MGAs—one that has the potential to reshape the competitive landscape for years to come.
Here is a look into the crystal ball of 2024 revealing four key predictions that will shape the MGA market this year.
1. Stronger together: tech forward MGA and carrier partnerships will be an unstoppable force
Excess and surplus (E&S) premiums have grown by double digits in each of the last five years, and, in parallel, MGAs have skyrocketed in growth. As a true test, MGAs held steady in 2023 amid extremely hard market conditions. Given their unique role within the insurance value chain, comparatively lean operations, and proven underwriting skill, an inherent adaptability gives MGAs a lasting advantage in both competitive and hard markets. And carriers stand to benefit significantly by partnering with MGAs.
MGAs offer carriers access to specialized markets and underwriting expertise which can help them expand their reach and accelerate growth. Carriers provide MGAs with greater distribution reach and access to capital so they can write larger policies and enter new markets.
By leveraging shared data and technology platforms, MGAs and carriers can work together to uncover valuable insights into market trends and customer behavior. These insights can be utilized to improve underwriting and pricing, and to develop bespoke insurance products that meet the specific needs of their customers.
According to McKinsey, 43% of the top 100 U.S. property and casualty carriers—and seven of the top ten—already have at least one MGA relationship through which they source new premiums. This percentage will only increase in the year ahead as MGAs offer a unique advantage in a hard market.
If capital costs decrease in 2024, carriers will seek to reclaim business capacity, further incentivizing MGAs to keep up strong financials. Carriers will partner with and invest in MGAs that have specialized expertise in the market and demonstrate consistent profitability.
2. Superior customer experience will be an MGA superpower
Because tech fueled MGAs are not bogged down by legacy tools and processes, they can more easily implement new and intuitive systems to support their customers. In 2024, top MGAs will differentiate themselves by providing excellent service, especially as buyers increasingly expect a frictionless digital experience.
To elevate customer experience, the most common technology investments will focus on enhancing user interfaces (UI), providing efficient content management through intelligent workflow automation, and embracing data and analytics to understand market trends and better meet customer needs.
Establishing strong InsurTech partnerships to build best-in-class platforms will be integral in 2024 to quickly build, underwrite, and distribute insurance products digitally and keep pace with ever-changing market conditions.
3. Data-driven underwriting powered by AI will help MGAs become hyper-specialized
The transformative impact of technology doesn’t stop there. Another outcome can be seen within niche lines of business offered by MGAs. Across the commercial sector, MGAs have established success within unique spaces like renewable energy, natural catastrophe, and cyber risk. Smarter technology is not only helping them serve these niches better, but also empowering them to identify and carve out highly profitable micro-niches.
In 2024, AI will help MGAs take this specialization to new heights. Leading MGAs will leverage advanced analytics, market trends, and customer data to pinpoint current or emerging sub-segments within existing niches. By training AI models on niche-specific data, they’ll understand risk and potential new markets at a profound level allowing them to launch niche-specific products that distinctly meet the needs of their target markets. Micro-niche markets that may be on the horizon for MGAs in 2024 include drones, autonomous vehicles, space tourism, and social impact.
This hyper-specialization isn't just about market share or speed to market; it's about expertise. By focusing on specific niches, MGAs can reduce competition, align their risk appetite, overcome underwriting challenges, and quote and bind policies quickly. In a world that increasingly demands specialized coverage, this unique combination of technological adaptability and product innovation makes MGAs perfectly positioned to lead the charge.
Read also: “Four essentials for smarter underwriting”
4. Optimizing for operational efficiency: MGAs will seek to do more with less
While economic inflation is on the decline and many market predictions expect 2024 to be more favorable than 2023, Swiss Re, a leading global reinsurance firm, reports that hard market conditions will continue in 2024. This is due to natural catastrophe losses surpassing $100BN in 2023 for the fourth year in a row. If the hard market continues, it will be paramount for MGAs to enhance operational efficiency and will require adaptive MGAs to adapt even more.
In 2024, MGAs will look to increase profitability by investing in technology to automate workflows, streamline underwriting processes, and move away from paper processes in favor of cloud-based systems. MGA leaders may also consider partnering with other non-competing MGAs and InsurTech companies to develop innovative solutions and share knowledge and resources.
Persistent hard market conditions are not necessarily all bad news for MGAs as they provide opportunities to further strengthen partnerships with carriers as well. Tighter underwriting conditions and higher rates will create a challenging growth environment for carriers. This scenario positions MGAs as the ideal solution to meet evolving market needs and fill coverage gaps.
2024: A Year of Full Possibilities for MGAs
2024 presents a clear call to action for MGAs—join forces with the right partners, earn unwavering customer loyalty, specialize relentlessly, and embrace a tech-fueled future to power expert underwriting and modernized operations.
Ready to unlock your full potential in the dynamic insurance landscape of 2024?