How does an MGA add value to both their carrier(s) and their producers? Niels Seebeck, chief underwriting officer of Arrowhead Risk Managers Program, answered this question with some valuable advice for all MGAs and PAs looking to grow their business. Part of National Programs, Arrowhead Risk Managers is a nationwide E&S property program for wind-driven business. This article originally appeared in Program Business and is republished here with permission.
The program space is ideally positioned to take the complexity out of complex risks. The key is leveraging innovation to improve efficiency, reduce the cost of customer acquisition and underwrite to a profit.
The value of an MGA is its deep expertise in a select niche and its experience underwriting a specific peril or type of business through multiple renewal cycles. You could say an MGA brings a level of sophistication to an insurance transaction. But what does that look and feel like? It depends on whom you ask.
For the producer, it’s being able to submit information on a risk and receive a prompt quote. For the carrier, it’s having a partner that acts as a good steward of its capital.
An effective and valued MGA is comfortable working on a high wire, balancing the needs of the broker and carrier while maintaining its own equilibrium and continually sharpening its performance and customer centricity. Sitting at the nexus of the commercial insurance transaction, the MGA helps the producer and carrier do their jobs better. It knows that the producer needs a competitive price and product for its client, while the carrier seeks the best possible terms and responsible capital management.
Achieving that win-win outcome requires a special blend of talent and the right technology. But first, an MGA must start by examining the business from the eyes of its two most important partners: the insurer and the producer.
Insurers need capital management
Being able to see things from the carrier’s perspective helps an MGA build systems and establish processes in a way that are aligned with the carrier’s requirements. While the MGA may know one peril inside and out, it must remember that a carrier writes many different perils and classes of business. So, the MGA must understand how its specialty fits into the carrier’s aggregates in order to avoid overexposing the carrier in that risk.
Often an MGA chooses to put a mix of carriers on an individual risk because it fits those carriers’ appetites better than others. But the MGA must not force something on a carrier that it doesn’t want. Regardless of the carrier mix, the effective MGA will remember producers are seeking a solution and don’t care what the MGA’s panel looks like. At Arrowhead, we strive to get those blends correct, so if carriers have slightly different appetites we can allocate the risk to fit each appetite. This requires ownership and accountability. Carriers want an MGA that will take the wheel, sharing its capabilities and strategy and engaging in honest discussions. The effort can cement a long-lasting relationship.
MGAs can really excel when it comes to managing aggregates for companies and getting the correct pricing for those values. The MGA that serves as a steward of the insurer’s capital earns great faith from carriers, resulting in a highly valued relationship.
Carriers also benefit from speed of execution when an MGA can bind good business, quickly. This is made possible by leveraging new technologies and integrating them into workflows and data management. The ideal MGA’s system output should be an accurate, clean dataset that shows the carrier exactly how it deploys their capital. That MGA will want to take the time to understand the carrier’s systems so it can provide a feed that integrates seamlessly with the carrier’s environment.
Working with an effective MGA, a carrier can get to market faster with a more customizable book. MGA loss ratios will be lower and more than offset the expenses a carrier is paying the MGA to produce the business.
Since an MGA can effectively distribute risk among several carriers, each carrier participating on that program accepts the volume and type of risk that’s ideal, and doesn’t have to take every risk.
Broker partners need competitive price and product
Speed of execution makes life easy for producers. A broker trying to write an account will often go out to several different markets and layer the risk. That broker may have to send the cat modeling to an offshore vendor, which can take 24 hours or more. On top of that, the broker must balance terms and conditions, exclusions and endorsements and then spend a week or so chasing people down by phone or email getting declinations.
Contrast that with the MGA model. Armed with a large chunk of insurer capacity it can put up, an MGA can write the entire account at once, allocating it among the insurers. A producer can submit the risk and receive an answer in an hour. If it’s a “yes,” they receive a hard quote that’s ready to be bound.
When a producer submits a risk to Arrowhead, we own 100% of the transaction process. Our underwriter takes the broker’s information, pulls it into our environment and then our technology rips apart the data and reassembles it in a way that allows the underwriter to make fast and good decisions.
Underwriters need information to make great decisions
Building a system is an evolution, but in time a good MGA can develop the capability to perform every task in-house. A typical workflow would include the following:
- Submission intake
- Binding and policy issuance
Since the inception of insurance, underwriters have had to capture data manually and analyze each dataset individually. An effective MGA will leverage technology to enable the underwriting process. I know my underwriters will always have the best possible information to make sound decisions because our automation integrates financial modeling, risk pricing, flood and tornado mapping and fire PMLs. They get immediate output that’s useful, and we can also integrate capital management from the carrier side.
Marriage of talent and technology
The best MGA partners recognize that its most important ingredient is its people. It takes the right team to not only select the right solutions but also integrate them into existing workflows. At our company, we’re fortunate to have a special group of people with an entrepreneurial mindset. They’ve spent time on the operational side and then moved over to the platform and technology side. They’ve spent time in the underwriting seat, so I can give them a high-level idea of the desired outcome and together we roll up our sleeves and seek the solution.
Being on the same page and having a common understanding of goals is critical. In most organizations, IT views its job to question and challenge, but at Arrowhead our IT associates are on board. Rather than put up obstacles at the outset, their first response is, “Let’s see how we can make this work.” That attitude doesn’t materialize overnight; it’s the result of experiencing success and failure together and contributing to value-creating improvements.
Yes, it’s a soft skill set, but there’s nothing soft about it. We sometimes call it a “healthy paranoia,” a drive to constantly stay on top of the newest knowledge and best available technology. We’re always kicking the tires on new products to see who’s capable of providing new data that will improve the quality of our risk assessment. If an insurtech or established company can do it, we will take their technology and knowledge and adapt it.
MGAs are well positioned to apply technology to improve underwriting, speed policy purchase and reduce the cost of acquiring customers, all of which is a win for them and for their carriers. Even when the peril is especially challenging and complex — or especially if it is challenging complex — the drive to improve never stops.
Niels Seebeck is chief underwriting officer of Arrowhead Risk Managers Program, a nationwide E&S property program for wind-driven business based in Alpharetta, Georgia.