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Managing General Agents (MGAs) and motor fleet underwriting

Risk & Analytics

By Mark Prowting and Stewart Osmond | May 15, 2020

It’s fair to say that relationships between MGAs and their carriers have not always been harmonious.

A Managing General Agent (MGA) is a specialised type of insurance agent or broker that has been granted underwriting authority by an insurer, according to the International Risk Management Institute (IRMI) and can administer programs and negotiate contracts for an insurer.

Tensions have largely been down to underperformance, misalignment and cultural challenges. For many carriers, their experience of working with an MGA has often involved poor data, delayed payments, and a lack of understanding around the performance of the book and what has been underwritten. This led to chaos for the capacity binder around renewal time and created stressful and toxic partnerships.

Thankfully, with the emergence of more progressive MGAs, things have changed. Over the last two years, MGAs have become much more common in the industry, largely as a result of John Hancock’s initiatives at Lloyd’s, which are requiring syndicates and cover holders to monitor underwriting performance much more stringently.

The future of MGAs

The MGA of the future is likely to look very different to those of the past and will need to think and behave much more like an insurance company. Many MGAs operate under the misconception that they’re a distribution company. Distribution is important, but it’s only one element of an MGA’s operation and there are many more that mirror an underwriting organisation.

The MGA of the future is likely to look very different to those of the past and will need to think and behave much more like an insurance company

Instead, MGA’s need to see themselves as an underwriting operation and an agent of the carrier. The most effective MGA’s will be those that do this well and fully align with their carriers.

A new breed of MGAs is taking a long-term approach and aiming to make money through profit commission based on combined operating ratio not just loss ratio.

MGAs and the changing motor market

Since the early 1990s, a pattern of consolidation has seen many household name insurers exit the motor market. Back then, there were many Lloyd’s syndicates, but virtually no managing general agents. Now, Equity is the only syndicate that remains, while there are dozens of MGAs.

The motor market continues to change. The recent departure of Amlin from the market removes a large amount of capacity. Where we used to see a relatively stable cycle of soft and hard markets, we now see sustained hard markets.

It’s clear the motor insurance market has a tendency to continually under-price. In a normal market, it would be reasonable to expect the removal of a huge chunk of capacity to drive up premiums. However, whether that will actually happen is less certain.

What to look for in an MGA

Motor is a relatively simple product, but easy to get wrong. Getting it right means balancing the three key pillars of underwriting, claims, and risk management. If you’re looking at using an MGA, look for one that does all of the following well:

  • understands where it specialises and doesn’t attempt to do everything – that only dilutes talent
  • is prepared to get out and explain to you what it does and why
  • is agile and able to move and develop quickly
  • provides a quality service that includes paying claims promptly and providing good risk management
  • uses data to look at risk, and underwrites it fairly and sustainably for the long-term
  • is able to manage claims and will provide you with regular claims information.

Service is key

Service has always been a key part of what underpins a good underwriting institution. For brokers, it’s a paramount concern whenever they’re placing business. Unfortunately, GAs getting this wrong in the past has meant brokers have often avoided them. Brokers have seen how capacity has been unsustainable, changing from year to year, and claims have been handled poorly.

In the new, forward-thinking MGAs, service quality, speed of response data and transparency have joined the basic deliverable of cash conversion.

Insights from the Annual Fleet Forum held 10th October speakers

Talbir Bains
Founder and Group CEO and CUO,
Volante Global

Steven Dickie
MD, Edison Motor,
Volante Global

Doug Ockwell
MD, Edison Motor,
Volante Global


Account Director, UK Land Transportation

Haulage & Logistics Director

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