ILC ARTICLE

Positive outlook for MGAs

23rd October 2023

Research on the performance of MGAs conducted by Insurance DataLab has identified a clear link between good customer service and profitability.

Insurance DataLab analyses data from more than 1,000 insurers and brands to glean a deep understanding of the health of the market, and where it may be heading.

When assessing the performance of MGAs, Insurance DataLab measures three key pillars – growth, profitability, and productivity.

Growth is measured by year-on-year revenues and operating profits, profitability is determined by margins over the past three years, while productivity considers staff costs as a percentage of turnover and turnover per employee.

Important

Speaking at ILC’s MGA Claims Conference 2023, which was held in association with the MGAA in London in September, Dan King, co-founder of Insurance DataLab, said, “It’s never been more important for MGAs to know how they perform against their competitors. Capacity in the market is harder to come by these days, so insurers are being more selective about who they choose as MGA partners and they are looking for those whom they believe will be more profitable partners in the long term.”

Insurance DataLab’s latest research, which assessed the MGA market between 2020 and 2023, found that overall the sector performed well during the three-year period. Revenues grew each year, although growth fell from 23% in the first year to just four per cent in the third year, profitability remained stable despite challenging conditions, while productivity increased due mainly to lower staff costs.

Size matters

Dan said, “Size matters, with the bigger players generally outperforming the smaller players. However, there are exceptions with the highest rating going to an MGA in the smallest revenue bracket, MPR Underwriting.

“But MPR Underwriting has just received five stars for the fourth year running from Insurance Times, which supports our own findings that there is a clear link between good customer service and profitability.”

Positive

Looking ahead, Dan is positive for the future of MGAs. He believes their role in the insurance claims industry will become ever-more pivotal, and says they are well-positioned to take advantage of the opportunities that will arise from an evolving market.

He said, “MGAs now play a significant role in UK general insurance, with many providing specialist expertise and underwriting capabilities in niche markets to customers and brokers alike.

“Although MGAs face a number of challenges, whether that be through regulation, changing consumer behaviour, or the economic landscape, MGAs have a bright future. They are more agile than insurers, they can develop new products more quickly, and often they are quick to address emerging risks such as cyber and climate change.

“Many are now adopting new technologies to provide highly innovative solutions. So we expect there to be plenty of opportunities for MGAs, which will translate to strong revenue growth and improved profitability.”

The MGA Claims Conference was supported by Headline Sponsor Claims Consortium Group (CCG); Gold Sponsors: Activate Group, Carpenters Group, EDAM Group, Enterprise, LexisNexis Risk Solutions, Pulse, Value Checkers, and Wiser Academy.