Just a quick peek at the top trends insurance experts had for 2022 shows that many of them are the same topics we’ve been talking about for years, such as digital transformation, partnership ecosystems, and using data and tech to understand customers better.
The insurance industry has indeed been slower to adapt. However, insurance is now at a significant inflection point. This change has been accelerated by the events of the last two years. Agencies have no choice but to accelerate their digital transformation initiatives, not just as a ‘nice to have,’ but as a means of survival.
New crop of MGAs is leading the charge
What’s driving the sense of urgency around digital? The next generation of tech-savvy, digital-first MGAs has already stormed the gates, bringing VC-backed innovation with them. Some experts have referred to this new crop of MGAs as “insurtech 2.0.” MGAs are gaining traction across the insurance distribution ecosystem, serving as intermediaries in the same way as retail agencies and brokers. However, unlike retail and wholesale brokers, MGAs often have binding authority from insurance partners. This means that MGAs can quote and bind policies that fit within the framework of their insurer partnerships. On top of that, MGAs often have expertise in niche or specialty lines of insurance, empowering them to create new risk products backed by their carrier partners.
As McKinsey notes, “Among the top 100 U.S. property and casualty insurers, 43%—including seven of the top ten—have at least one MGA relationship through which to source new premiums.”
As retail agencies struggle to remain relevant and competitive with the insurtech 2.0 renegades, what can we expect in 2023?
Here are three predictions:
- The transition from retail agency to MGA. This has been in the cards for years, but in 2023, it is inevitable. We should expect to see two common outcomes for retail agents: either they’ll do what it takes to become an MGA, including gaining underwriting authority, or they’ll hope to get purchased by one. The other alternative isn’t so positive: losing business to MGAs. Startup MGAs are the ones driving the future trends in insurance, much more so than legacy agencies. They’re growing rapidly, often by making strategic acquisitions based on product and line of business needs. Every retail agency will become an MGA in some form by the year 2025. Additionally, every current MGA will become an insurtech.
- Agents marketing on tech platforms. Agents, brokers, and MGAs will spend more on marketing to prospects across other tech platforms, such as job recruiting sites and auto-buying apps. By marketing at the source, agents can quickly bring new customers into the pipeline. To do this, MGAs must have the right message and mix of risk products that make sense for these platforms, such as workers’ compensation insurance. The most tech-savvy MGAs are already doing this and offering prospects a seamless conversion that makes it easy for them to jump from the platform or app onto the MGA’s website to search for insurance. A technology infrastructure that supports back-end, open API connectivity with partners, will be crucial.
- The rise of data scientists. As more MGAs and agents tap into their data to make more informed business decisions, they’re going to need experts who can help them make sense of it all. We have already seen data scientists become key players in financial services, retail, media and entertainment, and pharmaceutical industries. In 2023, we should expect to see them in insurance. Consider that agencies are sitting on years, even decades, of historical data about their customers and their own operations. The time has come for insurance industry data scientists to decode this data and help uncover important trends.
Technology tools such as automation, no-code/low-code, and open API architecture will help retail agencies navigate all of this change in the coming year. It will be more vital than ever for agencies and brokers to invest in tools that deliver speed, agility, accessibility, and ease of use for agency employees and customers. In 2023, more retail agencies will migrate from legacy agency management systems to a modern, cloud-based insurance platform. A platform empowers agents to automate internal processes and deliver higher-quality customer-facing experiences through online channels. This is the future of the industry.
So, buckle up, and let’s see what the new year brings. I believe 2023 and beyond will be all about insurance technology platforms. Agents must invest in their growth to become future-ready if they want to remain in business.
Source: Digital Insurance