July 7, 2022
Managing General Agents (MGAs) are specialized insurance agents or brokers that have underwriting authority from an insurer, which means they can underwrite, price, and bind coverage.
Over the past few years we’ve seen continuous investment into MGAs, and funding hasn’t slowed significantly even with the recent economic downturn. Here are some industry-wide trends among the big raises that are worth noting:
Most MGAs are designed around providing a predominantly digital intake process. Some are able to go all the way through binding and issuance, while others require agent intervention after intake, but digital focus gives them easy scalability.
Many MGAs launch in a narrow vertical, such as upscale homeowners, commercial fleets, etc. Once they’re running well in that vertical they often expand into related products for the same customer base. Lemonade is a great example of this approach: it launched with renters, expanded into homeowners and pets, and now on to personal auto.
Niche programs provide a unique opportunity for industry expertise to make a significant impact on an insurer’s bottom line. With the right expertise, MGAs can use data and partnerships to gain insight that helps them better price the risk and achieve more favorable loss-ratios. Given the current challenges the market is facing, expertise might be more important now than ever.
Strong Expansion Options
Tied to the niche focus, many MGAs have well-designed expansion plans, either growing in the number of states supported or expanding into additional insurance products. With a digital-first approach and the niche expertise needed, these MGAs have something worth scaling that customers want: great insurance products that are easy to use.
What: Branch specializes in offering embedded options and bundling auto, home/renters, and umbrella coverage. This bundling has been key to its growth to date and has driven strong direct-to-customer sales.
Why it matters: Branches digital-first approach is built upon its API infrastructure. Being API- driven means it can easily run embedded programs with its partners and sell directly to policyholders in a variety of ways. Smart use of data is key here, as Branch can use previously entered data to help prefill insurance applications.
Read: Branch gets massive financing boost for expansion | Insurance Business America
What: Focusing on upscale homeowners’ insurance and customer experience, Openly has maintained an annual net policy retention of over 90%. With its latest funding round, the company plans to expand into other insurance sectors and grow nationally. It also recently announced plans to enter the reinsurance market.
Why it matters: Openly’s expansion plans show the value of niche expertise. Its knowledge of the upscale homeowners market means that not only can it expand its current offerings to more states, it can also expand into reinsurance with confidence.
Read: Agent-Focused Home Insurer Openly Closes $75 Million Funding Round
What: Loadsure’s embedded coverage and automated claims process is paying dividends with a $11 Million funding round. Its digital-first approach gives it flexibility to quickly adapt to a changing marketplace.
Quote: “Being a digital-first company, we’ve enabled ourselves to build our technology from the ground up. Our technology and our algorithms have not evolved from any legacy systems; they’ve been built using the latest technology, which enables us to be very sophisticated in the way we utilize data,” said Loadsure CEO Johnny McCord.
Why it matters: When it comes to data, it’s both how much you have AND how well you can use it. New technology allows new data to be assembled and creates new competitive advantages for insurers that can use it well. A strong data advantage means an insurer can better price risk on an individual level and therefore have better loss-ratios.
Read: Insurtech MGA Loadsure making waves in cargo insurance
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