The Importance of Managing General Agents in Extending Coverage: A Discussion on the Long Tail Phenomenon
In the ever-evolving world of insurance, a significant player is making waves - the Managing General Agents (MGAs). According to Mike Keating, CEO of the Managing General Agents' Association (MGAA), these entities are the fastest-growing segment in property and casualty (P&C) insurance globally.
Keating advises MGAs to fully understand the business benefits of any AI tools before making an investment. In fact, approximately 40% of MGAs have already invested in AI, with some members using AI to increase underwriting productivity by over 40%.
MGAs, which fill a gap by offering coverage in niche and specialist areas where traditional insurers may lack the same expertise, are playing a pivotal role in the insurance market. They utilize capital from large insurers to underwrite on their behalf, providing insurers access to specialized product lines without building in-house capabilities.
The MGAA, with an increased membership of 58.8% since 2019, is leading the charge. The association's discussions, such as the recent one in City AM's new Long Tail series, explore innovative trends, regulatory landscapes, and the evolving role of various players within the stock market.
The series delves into the impact of emerging technologies like AI and analytics, as well as the strategic importance of niche segments. For instance, MGAs have underwriting expertise in niche sectors of insurance, such as cyber insurance and parametric insurance. In the UK, MGAs have a market share of just over 10% of the £47bn a year general insurance market.
Mike Keating notes that MGAs can bring products to market faster than traditional insurers due to their innovation and agility. However, he warns that over the next two years, rates are expected to come under pressure, which may cause MGA margins to drop or remain flat.
Despite this challenge, Keating believes that the MGA sector has the tools and ability to navigate the next 24 months. Leading European organizations equipped to handle the rating outlook amid a declining rating environment in the next two years include major credit rating agencies like Moody's, S&P Global, and Fitch Ratings, as well as financial regulatory bodies such as the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB).
The MGAs' strategic importance is evident in the cyber sector, where they play a significant role due to their deep, broad understanding of cyber requirements. MGAs also provide specialized underwriting for unique insurance needs, such as thatch properties, flood zones, and unusual cars.
To gain a deeper understanding of this dynamic sector, scan the QR code below to watch the full interview with Mike Keating. The Long Tail series, conducted by City AM, provides an insightful look into the forces shaping the future of Yahoo Finance.
