As the MGA market has grown, both in terms of annual premiums and lines of business, MGAs have reevaluated their go-to-market models for effectiveness and efficiency.
Over time, a few models have become more prominent than others, due in part to their proven efficacy with respect to the goals MGAs have. These models include the digital first, where the core of business is focused on outreach through digital channels; single segment, in which an MGA strives to expand market share and profitability within a particular sector; and embedded insurance, where MGAs provide coverage for products or services that consumers purchase from non-insurance entities.
In this blog, we’ll take a closer look at these three go-to-market models, how they are effective for the MGAs that deploy them, and how shifts in the greater insurance landscape may influence their popularity for specialized and E&S markets.
Digital first: The technical edge
Inherently, MGAs tend to be more technologically advanced than other players in the insurance industry; with lean operational structures and specialized markets, they often invest in the latest solutions to innovate and meet business objectives.
A digital first model is one that centers around technology solutions to optimize operations, expand reach, and strengthen partnerships in a rapidly evolving insurance marketplace. Essentially, these MGAs are focused on going to market via retail agent or, or direct-to-consumer channels by enhancing digital experiences. For retail agents, that could mean investing in a customizable agent portal which connects seamlessly to carriers and third-party data sources supporting the complete policy lifecycle. Nearly 75% of MGAs rely on the retail agent distribution channel to acquire new customers. Optimizing for a superior agent experience sets MGAs apart from their competition and creates a more reliable distribution network. Almost 60% of MGAs also employ a direct-to-consumer model making this a key focus for digital advancements as well.
For the direct-to-consumer channel, this could mean implementing easy, secure methods to submit applications online or offering tools and resources to help prospective customers assess their insurance needs. Competitive MGAs may even adopt digital channels such as search advertising or ensure their webpages are search engine optimized for product keywords to reach their target audiences. Digital first MGAs are also utilizing technology for faster speed to market when developing and launching new lines of business. They tend to focus their technology investments on core functionality like rating, underwriting, and policy issuance to set a strong foundation before optimizing in other areas.
When it comes to sourcing their technology, digital first MGAs remain split on their approach; about half of new startup MGAs opt to build custom tech stacks for their needs while the other half work with InsurTech partners. While proprietary solutions can address specific requirements, in-house development takes significant time and resources, so the tradeoff of owning the technology may not be cost-effective for a business that relies on fluctuating markets.
Single segment: The go-to provider
The single segment model is one where MGAs focus on a specific market sector with the intention of building their customer base and brand reputation before potential expansion into other markets. For example, MGAs that provide insurance solely for commercial trucking are single segment, sometimes referred to as mono-line or single customer. The upside of this strategy is that it maintains a narrow focus for operations which can help keep costs down. It also offers the potential for rapid brand recognition, as an MGA with favorable services within a sector can become known as the “go-to” for that line.
While some MGAs may dedicate themselves to a long-term single segment model, most operate on a finite timeline, with the intention of expanding once they’ve established themselves in the greater market. The single segment approach may be born out of several factors including untapped market potential or personal experience within a specific sector. By getting a foothold and establishing profitability, these MGAs can gradually shift toward new market penetration without jeopardizing their existing operations. It’s a tactic that has worked time and again and is likely why 30% of all MGAs utilize the single segment model.
With the MGA market expected to continue its growth for the foreseeable future, lines of business will likely continue to diversify and become more complex as consumers seek coverage for more and more aspects of their lives. Knowing this, the single segment approach may become riskier to take on, particularly in thinner or less explored markets. That being said, the end point for these MGAs, being expansion into new sectors, could offer significant upside as demand increases and their reputations as expert providers buys them market share.
Embedded: Peace of mind
The rise of the MGA originally came from filling the gaps left behind by traditional insurance carriers, thus providing people and businesses with coverage for things that they want safeguarded but would normally be unable to protect. In a similar way, the embedded go-to-market model is one where MGAs offer policies for products or services that would otherwise be unavailable.
One of the most common examples of embedded insurance is protection offered for tickets, such as for a flight. When purchasing a ticket, consumers are typically shown an add-on policy that they can purchase, so that if they are unable to make their flight, their money will be reimbursed to them. A similar service is often offered for a market known as delivery and purchase—which, as the name implies, covers the delivery of consumer goods from retailers.
Embedded insurance is seeing significant growth, with estimates that it could command 15% of the global gross written premium by 2033. Despite this, the market can be challenging to navigate, as the upside of innumerable products and services to insure is countered by a lack of prioritization by consumers. While home insurance, car insurance, and medical insurance are viewed as must-haves for many consumers, policies that cover everyday goods and even special event purchases aren’t categorized the same way. They also don’t benefit from legal mandates, such as with auto insurance, that would require policy purchases prior to engaging in the specific activity.
As a result, the MGAs who offer embedded insurance have the added challenge of convincing their customer base to add protection to their purchases. Their message can’t focus solely on how they’re better than their competitors; it must demonstrate why the audience should care in the first place. Nevertheless, there remains significant demand for embedded insurance and the MGAs that provide it.
A model for success
The future of MGAs is bright; markets are growing in both size and volume, and technology continues to improve efficiency and expand possibilities. While the models explored in this blog make up a significant portion of MGAs, there are many other approaches with unique structures, opportunities, and challenges. Plus, go-to-market models are not permanent for MGAs—they can change, blend together, and be used for different markets and product offerings.
Regardless of your go-to-market model, having flexible, reliable solutions at your disposal is key to finding, maintaining, and growing your success as an MGA.
As the InsurTech partner of choice for MGAs, Vertafore’s open platform and APIs provide access to a vast network of partner integrations, empowering you to innovate and customize your operations for maximum efficiency and profitability.
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