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How MGAs Can Stand Apart with Smart Claims Management

A new report shows that managing general agents (MGAs) are thriving. As this model attracts more attention, it will also attract more competition. A strong claims focus can help MGAs stand out.

The Appeal of MGAs

In insurance, a line is often drawn between the insurance carriers that write coverage and the insurance agencies and brokerages that sell coverage. MGAs blur that line. According to IRMI, MGAs are a type of specialized agent or broker. What sets them apart from traditional agencies and brokerages is that MGAs have underwriting and pricing authority, the ability to bind coverage and the authority to settle claims.

According to Insurance Business America, MGAs are a type of insurance wholesaler, acting as an intermediary between the insurance carrier and brokers. Although adding an intermediary might seem like an unnecessary complication, MGAs can actually provide significant value. This is in part because MGAs often specialize in particular niches, and their expertise can benefit the carriers, brokers and policyholders involved.

MGA Growth

In 2015, AM Best reported that carriers were increasingly using MGAs to handle underwriting. This strategy helped insurers access new markets while keeping costs down. MGA specialization could also facilitate expert claims handling.

In the years since that report, the COVID-19 pandemic has created new challenges for the insurance industry. The McKinsey’s 2022 Global Insurance Report shows that in 2020, global gross written premium growth (life, health and P&C combined)  slowed from more than 4% a year to only around 1.2%, while profits fell 15%.

As the world has recovered from the pandemic, MGAs have thrived. A study from Conning reveals that the MGA market surpassed $70 billion in direct premiums written in 2021.

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The Challenges Facing MGAs

MGAs provide many advantages, but they also face challenges and competition. According to Carrier Management, panelists at the 2022 OnRamp Insurance conference warned that anyone launching an InsurTech MGA needs to learn how to juggle. They also need to find a way to stand out from the other MGAs.

Technology is key. According to Carrier Management, the Conning report shows that MGAs are often successful at attracting tech talent, and they don’t tend to be burdened with legacy systems.

Succeeding as an MGA

The recent growth in MGA premiums shows that this model has what it takes to succeed in a challenging market. At the same time, this success will likely attract new insurtech MGA startups, resulting in increased competition. Long-term success will require the right strategies.

Claims management should be part of that strategy.

As has been pointed out, a major part of the appeal of MGAs lies in their specialization. The niche focus can help MGAs during both underwriting and claims processes.

Policyholder satisfaction has been falling. The J.D. Power 2022 U.S. Property Claims Satisfaction Study found that claims satisfaction had dropped to a five-year low. This is troubling news for both brokers and carriers because dissatisfied claimants tend to switch insurance providers. In fact, a report from Accenture found that insurers could lose $170 billion in premium over the next five years due to customer churn after unsatisfactory claims.

If MGAs can improve the claims process, they can help secure that $170 billion premium. They can keep policyholders happy and cement their place as a valuable intermediary between carriers and brokers.

How to Improve the Claims Process

For the claims process to work, it needs to succeed from both the point of view of the claimant and the file handler. The claimant cares about things like speed and communication. The file handler cares about ease of the process and the amount of work involved, as well as achieving a fair and expedient outcome.

A good claims system can make claims better on both ends. Integrations, automation and document management reduce the amount of time that the claims handler needs to spend on tedious and redundant tasks, resulting in a faster claims process and freeing up time to devote to the big picture. Reducing the amount of time and work required to process claims also produces cost savings, an important consideration for any MGA trying to make a profit.

The MGA model is thriving right now, and this is creating exciting opportunities. For individual MGAs to grab their share of the market, however, they need to manage costs while differentiating themselves from the competition.

VCA Software provides customizable workflows, reporting, analytics, digital payments and other state-of-art tools to deliver a modern and cost-effective claims experience. Request a demo.

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