Overcoming Barriers: Where Are the New MGAs?

Our industry’s rising volume of non-traditional risks won’t diminish anytime soon. That’s why it’s vitally important to support underwriters and other entrepreneurs who choose to build new managing general agent (MGA) businesses.

When MGAs operate at peak performance, they possess the unique ability to underwrite specialty or unconventional risks effectively and profitably, bringing tangible value to carriers, brokers and agents.

But there’s a problem: The barriers to entry for new MGAs keep rising. Tight capacity, a hardening market and a looming recession are just three of the many hurdles that startups must overcome. They also must navigate an increasingly complex and expensive insurtech landscape.

If we are to leverage the power of MGAs to move the industry forward, then we must give entrepreneurs the resources they need to break down these barriers. That’s why empowering entrepreneurs to leverage MGA incubators and accelerator platforms will be an essential step in growing the MGA marketplace.

Access to capacity ranks as one of the top barriers to entry into the market for new MGAs. While there are carriers today that want to exit or explore strategic ways to enter certain lines of business, they’ll only do so if they secure an MGA partner they can trust. The partner usually needs to be backed by a book of business or data that indicates success and expertise in their area and, depending on the level of complexity of the product(s) they aspire to launch, the new MGAs will go through a strenuous due diligence process before obtaining capacity approval or reinsurance support. This reality puts new MGA owners in a difficult position. They can’t compete for capacity until they demonstrate their effectiveness, but they can’t prove their worth until they gain enough capacity to build trusted relationships and win business.

A lack of resources can also serve as a barrier for start-up MGAs. For example, an underwriter who worked at a large carrier before starting their own MGA may have previously enjoyed access to countless resources — from marketing and licensing to legal and compliance. Now, they must do it all on their own.

In theory, insurtech should make it easier to launch a new MGA, but the opposite can also be true. Many of the innovative platforms that make underwriting, rating, quoting and binding processes easier are also prohibitively expensive. Further, many MGA entrepreneurs don’t know where to start with insurtech, and have limited access to capital or time to invest into ensuring they are building the right technology stack to begin their business or successfully run it long-term.

These challenges can overwhelm even the brightest of entrepreneurs. How do you find capacity, scale your tech stack, and build a team all at the same time?

MGA Accelerator and Incubator Platforms

Mentors are excellent for one-on-one relationships, but launching a complex business like an MGA is far more than a one-person job. That’s why MGA accelerator and incubator platforms play such an important and fundamental role. The best platforms give entrepreneurs a wealth of customizable resources designed to help them build the foundation for a successful MGA and guide them through their first growth cycles.

Accelerators use their industry relationships to give entrepreneurs the type of collaboration and networking opportunities that will bring their ideas to life. Accelerators and incubator platforms can also provide strategic guidance by performing due diligence on insurtech solutions and showing new MGA owners which digital tools will make them more efficient before they lock into a single — and potentially costly — solution.

In addition, an incubator will help an MGA startup founder view their business through the lens of an outsider. They’ll use their expertise to help entrepreneurs define underwriting guidelines, build rating models, handle channel conflicts, rectify their non-competes, and other pertinent details. And once an MGA is established and ready to scale, an accelerator or incubator can help them find the right talent so they can move forward with confidence.

Right now, however, we simply don’t have the MGA accelerator and incubator platforms that are data-driven, technology-enabled, and possess the specialized underwriting expertise and the track records to adequately help meet the demand.

The more the insurance industry invests in and creates networks of seasoned veterans and technology experts, the more we will be able to define paths for new MGA owners.

The future of our industry remains bright, but we must continue to create an ecosystem that empowers all parties involved to bring forward the solutions needed to support the current and future needs of our insureds and the market.

Topics Insurance Wholesale