Tech increasingly a differentiator in competitive MGA market

Insurers are increasingly demanding greater data connectivity, modeling and underwriting tools from the MGAs they partner with, while delegated underwriting authority enterprises themselves are utilizing tools such as analytics platforms and integration hubs to support their operations, according to a new Conning and Vertafore study.

Earlier this year, Conning canvassed a host of MGA executives and insurers for their views on the role of technology in the market.

Some 64 percent of insurer respondents confirmed their expectations of MGAs were changing.

Those changing expectations include demands for greater data connectivity, ongoing technological enhancements, real-time analytics along with more advanced tools for catastrophe modeling, underwriting and claims handling.

The demands also include an expectation that MGAs will increasingly leverage data analytics to make faster decisions than the insured.

That, Conning and Vertafore said in their report, is primarily because insurers know that for the most part, the risks MGAs present to them to underwrite will be well within their appetite, and likely will not require further scrutiny.

Technology, the study noted, “represents both a challenge and a significant asset for MGAs”.

It generates confidence that their investments will lead to profitable underwriting. At the same time, it gives them an advantage over traditional insurers that often struggle with outdated legacy systems, while more modern MGAs can leverage the benefits of cloud-based technology services to enhance their operations.

Growing MGA confidence in tech investment

The study also found a growing confidence among MGAs that they are now investing adequately in technology.

“The percentage of respondents who ‘strongly agreed’ with the statement that they are worried about underinvesting in technology has dropped significantly over the past five years – from 23 percent in 2019 to just 5 percent in the 2024 Conning survey,” the report noted.

Conversely, the proportion of survey participants who disagreed with the statement they were worried about underinvesting in technology increased to 58 percent in 2024 from 44 percent in 2019.

“This shift suggests a growing confidence among MGAs that they are investing adequately in technology to support their operations and stay competitive in the market,” the report said.

“Overall, while keeping up with technology remains a key concern, MGAs are increasingly viewing technology as a powerful tool that sets them apart from traditional insurers.

“Reduced concern about underinvestment indicates that many MGAs are becoming more proactive and confident in their technology strategies, recognizing the critical role that these investments play in their long-term success.”

Shift in how MGAs harness data

Responses from the survey’s participants show there has been a significant shift in the way MGAs harness and leverage data, as 74 percent of those who took part said they are utilizing data analytics in ways that were not possible four or five years ago.

Elsewhere, the survey found that MGAs are bolstering their back-end operations by increasingly using sophisticated tools like data analytics platforms, automated underwriting engines, comprehensive policy administration systems and integration hubs.

When it comes to underwriting, the report found that technology has transformed myriad processes for MGAs. For example, web-based tools and electronic platforms are significantly enhancing operational efficiency and enabling MGAs to interact more effectively with brokers and customers.

But, as the report noted, these advancements come at a cost, and the rising expenses associated with some of these tools and third-party services is putting pressure on MGAs’ profit margins.

As such, MGAs have to strike a careful balance between innovation and financial sustainability.

Given the costs involved, MGAs have to ask themselves whether investing in technology is truly worthwhile. That is especially true for smaller organizations as the complexities and cost can threaten their independence and viability, the report said.

“As the insurance landscape evolves, the strategic use of technology by MGAs has emerged as a critical factor in their success,” it noted.

Tech a key differentiator

However, as the report highlighted, in an increasingly competitive environment, technology and how it is harnessed has become a key differentiator.

“With MGA growth outpacing the overall industry, the space continues to attract attention from insurers, retail agencies, investors and entrepreneurs. And technology has increasingly become a way for MGAs to stand out as more entities enter the distribution channel or look to expand their footprint,” the report said.

As found in Conning’s recent MGA survey, 89 percent of insurers are expanding their use of MGAs. When it comes to selecting an MGA to partner with to launch a new program, Conning said several factors are critical, and technology plays a pivotal role.

“Respondents highlighted the importance of advanced technology and data analytics as key differentiators, enabling ease of doing business and supporting strategic alignment,” the Conning and Vertafore study found.

And according to the report, MGAs are experiencing the greatest technological benefits from focusing on four key areas.

One of the greatest assets an MGA has is its ability to quickly stand up new programs and get products out to market more rapidly than traditional insurers. And so technology that can support getting programs up and running, and potentially corner a particular insurance segment, is very attractive to MGAs.

Using technology to right-size costs is another area of focus, the report said. Technology spend directly impacts the bottom line, so MGAs must walk the line between choosing robust systems that meet their needs and over-investing in solutions with superfluous functionality.

“One way to manage this balance is with a system that allows for rapid, highly individualized configuration. Configurable systems enable MGAs to build the system that they need today, while allowing for the potential to add functionality down the road,” the report said.

Another key area is technology’s ability to integrate with third-party applications and data sources.

“A flexible technology stack enables MGAs to choose the right solutions for their unique business needs, while tapping into the efficiencies and growth potential that those tools can create,” the study noted.

The fourth key focus is on the MGA-owned customer portal.

“As MGAs look at technology to drive a better customer experience, customer portals are becoming more of a differentiator,” the report said.

“Just like the clients they serve, retail agents are increasingly expecting a digital, real-time experience from their MGA partners. In response, MGAs are increasingly adding portals that allow direct customer interaction.”