Regulators have been looking into MGAs as there has been a perception that any form of delegated underwriting increases the regulatory risk. This article is a timely reminder that these risks are overstated and that the vast majority of MGAs are well run, by good people and are an essential part of the insurance supply chain. Lloyd's sees an increasing proportion of its income being derived from this source as part of its 2025 vision so what is the differentiator between the good, average and badly run MGA?
The answer is how they manage their business and with particular regard to managing customers. The interface with the customer is where things generally go wrong and anyone who delegates their underwriting must ensure that their delegate controls their business and deals with their customers as the risk carrier themselves would do - Conduct Risk!
How can we then ensure that this is so? Technology is key to this and its not only a good policy administration system, those are legion; this is all about an effective interface between the customer through to MGA to the carrier. Those companies able to offer their risk carrier the capability to provide straight through risk and claim processing are placing themselves head and shoulders above their peers and allow the risk carrier to manage their own regulatory exposure proactively.
Technology clearly plays a significant part in an MGA’s efforts to meet the requirements of the regulators