Managing general agents (MGAs) often use specialized technology and software systems to enhance the efficiency of key insurance activities like quoting, policy administration, and claims processing.
For over a century, MGAs have helped insurers tap into their niche expertise and non-standard markets. In the modern insurance landscape, MGAs are leading the charge leveraging technologies that streamline key insurance processes and create more operational efficiency for both themselves and the insurers they serve.
Below, we’ll review the role MGAs play in the insurance space and dive into their use of technology to transform traditional insurance operations.
What is an Insurance MGA?
Managing general agents (MGAs) are specialized agents or brokerages with the authority to underwrite policies, settle claims, and negotiate contracts for insurers. They have contractual relationships with insurers and have more privileges than standard agents or brokerages, who may only sell policies and help policyholders fill out applications — but don’t influence the underwriting process.
Notably, the insurance company itself will foot the bill for any claims payouts. MGAs are not responsible for making these payments from their funds, though they are directly involved in processing and approving claims. Thus, MGAs have a significant impact on insurers’ profitability and overall financial performance.
MGAs must meet state licensing requirements and national guidelines set by the National Association of Insurance Commissioners (NAIC). In comparison, standard agents are typically subject to less regulatory oversight, given their more limited involvement in policy underwriting and claims management.
Understanding the Role of MGAs in Insurance
The role of the MGA emerged as the industry expanded westward during the Industrial Revolution. MGAs helped large operators traditionally located in the Northeast enter new markets, regions, and demographics without hands-on management or oversight.
Today, MGAs continue to work as intermediaries between agents, policyholders, and insurers, helping to sell, price, and underwrite new policies and manage renewals and claims settlements. However, MGAs have also evolved into a more specialized role.
One of the common uses of MGAs in the modern insurance market is to handle niche markets or lines of coverage. Because MGAs have underwriting authority, they can take certain risks and cover more specialized needs than insurers that handle general insurance policies for auto, homeowner’s insurance, etc.
Key Benefits for Insurance Companies Partnering with an MGA
There are several key advantages for insurers that partner with MGAs, including:
Niche Product Expertise
MGAs often specialize in non-standard lines of business, helping insurance companies expand into new product lines without needing to develop specialized expertise themselves.
These agents understand the risks of non-standard insurance products like flood or workers’ compensation policies, enabling insurers to offer tailored solutions for these unique circumstances in addition to their standard offerings for auto or homeowner’s insurance.
Access to New Markets
Another key advantage of partnering with MGAs is that it’s a cost-effective way for insurance companies to enter new markets or geographies.
By partnering with an MGA, insurance companies can serve policyholders in remote locations without spending the money to open up a new office or train and hire staff.
Enhanced Efficiency with Specialized Technology
As we’ll discuss in further detail below, MGAs are uniquely positioned to overhaul legacy tech infrastructure for modern solutions.
They often have more streamlined operations compared to insurance companies, so it’s generally easier for them to engage in digital transformation efforts. In other words, given their smaller size, tech investments may not be as costly for MGAs, and they can often make purchase decisions more quickly.
As a result, insurers can take advantage of partner MGAs’ leadership in tech innovation, as they’re more willing to adopt emerging technologies and digital processes before insurance companies will.
How MGAs are Embracing Technology for Operational Efficiency
The insurance space isn’t known for being a technology-forward industry. However, recent growth in insurtech solutions paired with MGA’s appetite for innovation has helped encourage tech adoption among these agents.
For starters, many MGAs are newer businesses compared to incumbent insurance companies. Thus, they may not be as bogged down by legacy technology and outdated systems to begin with. Then, as discussed above, if and when they want to upgrade their current technology, they can do so more quickly and cost-effectively.
Key Technologies MGAs are Using to Optimize Streamlining Underwriting
MGAs are leveraging emerging technologies like automation, artificial intelligence (AI), machine learning (ML) systems, and advanced data analytics to improve operations.
More specifically, they’re adopting automated underwriting, policy, and claims management systems to process applications, evaluate policyholder risks, and settle claims with greater accuracy and efficiency.
These critical insurance processes can be time-consuming and resource-intensive when managed by hand. However, adopting digital platforms to reduce manual work can shorten processing times and enhance decision-making, leading to better satisfaction for policyholders and improved performance for insurers.
Transforming Insurance Policy Administration Through Automation
For many MGAs today, the most critical aspect of their tech infrastructure is their policy administration system (PAS), which is where they manage the entire policy lifecycle.
A PAS that leverages automation helps MGAs reduce their reliance on manual workflows for handling policy issuance, renewals, and cancellations. The result is quicker processing speeds and a lower risk of human error, leading to better satisfaction for policyholders, greater productivity for agents, and long-term profitability improvements for insurers.
The Impact of Technology on MGA Distribution Channels
The increased use of digital platforms has also transformed MGA distribution channels. MGAs can now use online portals to distribute policies, supporting self-service functionality for policyholders and a streamlined sales process for agents.
This way, policyholders, agents, and insurers have real-time access to important policy data — when and where they need it. Plus, policyholders can submit applications, manage policy renewals and make payments on their schedule, supporting enhanced satisfaction, loyalty, and retention.
How MGAs Use Data Analytics to Improve Customer-Centric Solutions
During a time when consumers are demanding more personalization, advanced data analytics help MGAs better understand policyholders and applicants, enabling more precise quotes and tailored coverage options. In turn, policyholders get the personalized insurance offerings they’re looking for, and MGAs can stand out in a crowded marketplace.
Data analytics provide MGAs with real-time data from primary and third-party sources in one centralized location, providing a single source of truth for MGAs to rely on during underwriting. These tools further support underwriting accuracy by leveraging predictive modeling to determine which applicants are most likely to submit a claim, with policies priced accordingly.
The Future of MGA Insurance: Innovations on the Horizon
The U.S. MGA market has grown significantly in recent years, with some reports estimating that the premiums written by MGAs grew 13% over the past two years, ahead of the overall growth trends for the P&C insurance space. To fuel their continued growth, the following trends and innovations are expected to shape the MGA market over the coming years:
- Expansion into micro-niche lines of business: The continued adoption of technology like AI and ML will allow MGAs to offer new lines of business, particularly in micro-niches where there is a lack of historic information available, like offering coverage for autonomous vehicles, cyber risk, natural catastrophes, etc.
- Greater ability to leverage metadata: The availability of conventional data continues to grow, though the use of alternative data and metadata will become more prevalent, helping to provide previously unavailable insights into an applicant’s behavior patterns, risk factors, and more.
Innovating Insurance Operations with Insuresoft
Insurers and MGAs looking to enhance operations with the help of advanced technology systems can turn to Insuresoft. We offer a mission-critical core software platform that helps organizations compete and win in today’s complex environment.
The Diamond platform is designed to handle it all– whether you’re looking for a complete suite, a policy and billing platform, or a standalone claims system, we deliver the data-driven technology you need to advance your mission.
Insuresoft is particularly well-suited to MGA insurance agents who write through multiple agents for multiple carriers, as the distribution and agent management functionality of the platform is extremely robust.
It’s one system built for everyone – contact us today to learn more about the Insuresoft Diamond and see how it can position you for success.
