16 BROKERS’ MONTHLY
Welcome to the MGA world
Evolution’s Paul Upton believes that watching the news these days
can be a harrowing experience. If we avoid the next global
pandemic, we might just live long enough to see what the credit
crunch has left intact of our pensions and savings.
Imagine then how much worse you’d feel if you opened up your
favourite trade paper one day and read that your whole business
model had been deserted by the suppliers you need to continue
trading? Welcome to the managing general agents’ world
by Paul Upton
Chief Underwriting Officer particularly the smaller ones - experience
cutting edge and a degree of competitive
Evolution Underwriting
when dealing with larger insurers through
advantage to the brokers they deal with.
traditional branch structures.
Most MGAs deal with a relatively small
ver the last six months there have
Most of the major UK insurers have
O
panel of brokers, thereby accentuating
been a number of carefully stage-
invested in aligning their service delivery
these benefits provided by virtue of a
managed announcements by
towards larger units of distribution,
degree of exclusivity.
insurers. These have drip fed into the
whereas MGAs tend to focus on the
I believe that independent
market the intention to scale back their
smaller end of the broker market.
underwriting agencies still provide an
involvement with a number of MGAs, or
MGAs therefore provide a level of
absolutely vital function in the UK market.
underwriting agencies as I prefer to call
attention and delivery that the larger
From an insurer’s point of view they allow
them. There have also been some
insurers normally reserve for their strategic
access to business through distribution
disparaging remarks about the whole
partner brokers. This allows smaller
which would otherwise be out of reach
concept, and future relevance of the model
regional brokers to compete on a level
due to organisational constraints.
from a number of senior industry figures.
playing field with larger competitors, such
However, this is not really a surprise
as the consolidators and the national rom a brokers’ perspective,
when you consider how many of these
brokers.
deals were forged in the crucible of the
The large insurer’s service to
F
partnering with a well-run
underwriting agency provides the
soft market. They were seen by insurers as
independent regional brokers is generally help and support that is vital for them to
quick access to top line income, and a
pretty poor judging by the industry grow their businesses. In fact, it is fair to
means of securing access to market. In
surveys that have been published in recent say, the arrival of MGAs has actually
reality the commissions paid to MGAs
years. Successful MGAs have to provide a helped prolong the broker model.
were probably too high and the result
high quality of service, which is why many The length of the soft market cycle
forecasts probably too optimistic.
brokers use them. The level of has already flushed out a number of
So what we are seeing now is the
duplication, error, frustration and cost unsustainable MGA models. But
inevitable shakeout of those poorly
involved in dealing with larger insurers conversely, many independent regional
performing deals. There is a general
can make SME business marginal for brokers are now reliant on the future
perception in the industry that we are
some brokers. MGAs should be a more prosperity and expansion of underwriting
heading into a more favourable pricing
efficient and cost effective way of agencies.
environment for insurers. In that overall
transacting commercial business for So despite the messages in the press
context there is every incentive for
brokers. If this is not the case they will not about how insurers are paring back, the
insurers to grab greater share of the value
survive. bottom line is that MGAs that continue to
chain and cut back on delegated
That said, when compared to the bring insurers the right business and
authorities – especially as their confidence
larger insurers, most MGAs are relatively consistently deliver the required
in medium term top and bottom line
small businesses that are hungry, agile and underwriting results, or better, will be
results begins to increase.
aggressive. This means that regional around for some time yet.
What is certain though is that
brokers can work with MGAs to grow Those agencies with a well thought
independent brokers seem to enjoy trading
their businesses by acquiring new clients – through and differentiated business model
with MGAs on the whole. The reasons for
precisely what both parties need to do to and a focus on profit will continue to
this are pretty obvious when you listen to
prosper. prosper. And that’s good news for
the frustrations that many brokers -
Therefore MGAs ought to provide a everyone. IBM
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