Taking the Long View
Panelists say the program market is not saturated, and unlikely to ever reach that status. Programs also have a life cycle.
It’s about having an organization capable of weathering the storm through various business cycles. There are always unforeseen losses, unforeseen circumstances, and carriers that come in and out of the marketplace that affect the distribution of programs. Geoffrey McKernan, NSM Insurance Group
Limits on the number and growth of insurance programs may not exist, and if they do, they’re in little danger of being reached at this time. “No way,” is Glenn Clark’s ready response to a question from a webinar attendee’s question as to whether the market for insurance programs is saturated. But starting a program is no guarantee of success. That’s a combination of execution, timing and fortune.
“There are a lot of new entries into the program business, but only 50% of them do it really well,” Geoffrey McKernan said. Program administrators and carriers must think long term and should be prepared for multi-year cycles. That includes the startup phase, followed by periods of growth and contraction.
Every successful program requires a signifi cant investment in infrastructure, McKernan said. That’s also a key point that distinguishes program administrators from other wholesalers.
“You have very few MGAs investing in infrastructure. As program managers, we invest in infrastructure,” McKernan said. “We get audited. There’s an auditor in our offi ce almost every month. You have to be able to handle all of that. You have to have that entire infrastructure to withstand the market. You have to build a business, not a lifestyle.”
Copyright © 2010 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
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