Seizing the Opportunity with Mike Keating (MGAA)
Following the outstanding success of the 2022 MGAA Conference at etc.Venues Houndsditch, Modern Insurance Magazine sat down with Chief Executive Officer Mike Keating to debrief – debating the benefits of the MGA market, the value of face-to-face events in a post-pandemic world, the future of the industry, and more…
Q: Hi Mike, thank you for joining me today. First of all, I want to extend a big thank you for inviting Modern Insurance Magazine to the MGAA Conference back in June, we had a fantastic time. What were the key takeaways from your members and delegates? Have you received any surprising feedback, views or opinions?
A: I was extremely pleased with the conference, we had nearly 900 people in attendance which is certainly an increase on our turnout from 2021. I think a real sign of the success and growth of both the MGAA and the MGA community is the fact that we will be moving to a different venue – a bigger venue – next time, which is always a great sign of progress. In terms of overall feedback, I’ve been particularly pleased with the responses from certain insurers and our MGA members, saying how relevant the content of the day was to the way that the MGA market is at the moment, tackling relevant challenges, issues and opportunities – especially through the panel sessions.
Q: What were your MGAA Conference highlights?
A: David Howden’s keynote speech was excellent. He gave a clear message that MGAs are flourishing, they’re here to stay and they’re the very tip of the spear in terms of relevance within today’s modern insurance market. Our regulatory panel discussed how MGAs can navigate challenges on a regulatory basis, and our claims panel recognised that the relationship between insurer, claims TPA and MGAs may not be where all stakeholders want it to be. This panel in particular teased out some of the challenges – and crucially some of the solutions, too – around how that relationship can be made a lot better for the end customer. We had some excellent breakout sessions from our sponsors, and I was delighted to moderate the Next Gen session, which is a fantastic opportunity to look at young people as the future of our industry. It had a brilliant turnout, and that was incredible to see. It was a fantastic event overall, and the challenge now lies in looking at how to improve!
Q: After having the opportunity to be face to face with your members once again, how will feedback from the conference influence the support that you continue to offer to your members?
A: We were fortunate enough to move back to face-to-face events at the back end of 2021, and we had a ‘Meet the Market’ event for our MGAs and Brokers in Birmingham earlier this year, which was another successful day. Teams meetings, Zoom meetings, they’re certainly here to stay, and there’s definitely a place for them within our relationship-based industry.
However, I find that when you do events face-to-face, and those events are attractive to industry colleagues, people want to come along more than ever because it’s a natural move away from the digital space which we inhabit so frequently now. The content of the conference and the schedule of the day was endorsed by everyone there, and I think the opportunity to speak to individual members and insurers around capacity, products, where they see the hard market progressing, new product innovation – it’s a fantastic networking opportunity. As an association, we’ll always make sure we focus on face-to-face networking and it’s absolutely critical that we do. We have to stay relevant, and we have to do things that are relevant for our membership both now and in the future, so we can make sure our proposition is ahead of the curve. We need to see things that are likely to impact our members very quickly and then we can react, working with our membership in order to exploit those opportunities or address those challenges, and that’s the key role of the MGAA. Face-to-face events really give myself and our Executive Team that opportunity. With everybody in one room, you get a lot of time with people, and that’s really special to see after such a long time apart.
Q: As the MGA Community faces increasing regulatory reforms, what do your members feel are the biggest challenges when balancing innovation with compliance?
A: Regulatory reforms must be proportionate. Proportionality really is the key, and I think there’s a school of thought at the moment which might say that what the regulator has been asking for is disproportionate, more demanding. We have a great relationship with the regulator and we talk about proportionate regulation quite frequently, with regulation tailored to the size of an organisation. We’re also talking to a number of members about the concept of fair value, so that’s something that will be circulating soon to offer some observations and insight on where the market is at with delivery of fair value through the value chain.
So, you’re right, it is a balance between innovation and regulatory compliance, and most MGAs are in a fantastic position to manage this and deliver back to what the regulator is asking for. No business in the insurance sector starts off wanting to give a bad outcome to a customer – that’s something we just don’t see. I would hope there’s greater recognition of the fact that all firms just want to do what’s best for the customer. The checks and balances within the regulatory framework allow those customers to get fair treatment – with the right product at the right price – and our members and brokers have been doing this for an awfully long time. Which comes back to my proportionality comment, in that the MGA ecosystem will continue to deliver fair value, innovative products which are right for the needs of the customers, and that fair value aspect will be monitored. But let’s not overburden the system with measurements, because as soon as you start doing that you start eating away at the innovation, leading to poor outcomes for customers. I know the regulators are aware of this, and we’re not shy in sharing that fact, but proportionality really is crucial, I think.
Q: Other than reforms, what are the challenges for the MGA market at the moment?
A: This isn’t just unique to MGAs but the wider sector, and that’s headwinds in terms of claims inflation, fraud and potential indemnity exaggeration. We’ve all seen this in tough economic environments of the past, but I really hope that the industry doesn’t push all customers into one box and presume that every claim is fraud or indemnity inflated. The genuine claimant should still have a clear direction of travel in terms of getting their claim looked after. As we start entering these headwinds, we need to be thinking as an industry about how we are going to be communicating that back to our customers. Is the claims process likely to be elongated, because there’s a greater degree of review around fraud and indemnity mitigation? Will customers notice that? Possibly not, but there’s an obligation for insurers and MGAs to have an understanding of the fact that recessionary linked claims may create a slight change in the optics going forward. If there’s not, that’s fine. But if there’s going to be delays, I think we have a duty and an obligation to manage expectations and share that with our customers.
Q: On the positive side, what do you think is the main reason behind the increasing popularity and utilisation of MGAs?
A: Well, there’s certainly a number of positive factors in play for MGAs, starting with deep underwriting expertise and product knowledge. Insurers see MGAs as a low-cost route to market; they also use MGAs to get insight into specialist, niche products in areas that they might not want to invest in themselves when it comes to systems and infrastructure. This makes MGAs extremely attractive. They also continue to embrace the latest technology – a lot of our members use AI in their service and proposition, they haven’t got legacy systems, they’ve got fantastic management information and they really know the intricacies of their portfolio. They’re increasingly attractive to capital providers and incredibly close to their broker partners. They understand customer changing habits, and they have both the agility and the ability to deliver the latest product requirements to the market, faster than their counterparts. There’s a whole host of things which continue to make MGAs attractive to capital deployment, on the understanding that those MGAs have the necessary skillset and expertise for capital providers to trust them and deliver on their promises.
Q: How has the lifecycle of an MGA evolved since their inception, and what might this look like in ten years’ time?
A: That’s a good question! Let’s start off with what I call a ‘pure MGA’, who is underwriting with fiduciary duty whilst every other aspect of the service still lies with the insurer. But if you fast forward, you now see MGAs embracing so much more of the insurer responsibility. They are virtually insurers, and everything they do sounds, feels, and looks like a bona fide insurer – they’re just using somebody else’s capital to deliver the service. You can really see that whole progression, where an MGA might’ve previously asked the value chain partner to provide HR, marketing, operational central functions, etc – but the MGA has evolved now to do all that themselves.
Of course, this is all dependent on the size of the MGA in question, but what I would say is that most, if not all, MGAs have the ambition to become a virtual insurer. They want to work with their underwriting partners around underwriting performance, but they also want to operate as a virtual insurer and effectively become an extension of that insurer themselves. So, if you’re looking at MGAs in ten years’ time, I think it will just be a natural evolution of that. I think the introduction of AI technology will be a real gamechanger in terms of both the underwriting and the operational process, and depending on customer behaviour in 2032, I’m sure you’ll have all different kind of products meeting different kinds of customer demands. We’ve already introduced pay-as-you-go insurance and stop/start insurance, for example, but all of this is driven by how that customer wants to purchase their insurance, what their requirements are, commercial or personal, especially in those niche and specialist areas. And that’s where MGAs in particular are very agile, very nimble in addressing customer needs quickly.
Q: You’ve already mentioned AI and the tech innovation side of things, which is great. What are some of the further areas of opportunity for MGAs, and how can they capitalise on new market opportunities in order to maintain that growth?
A: I think for MGAs, where they have such strong relationships with their capacity partners, they deliver consistent underwriting profits and naturally want greater access to those. If they find that these underwriting profits are not accessible, possibly due to the capital model, then I think MGA’s will continue to go and source alternative forms of capital. This is something they’re doing now and it’s something they will continue to do going forward.
MGAs also have technology on their side in order to speed to market; they’re not weighed down or held back by legacy systems as I’ve previously mentioned. In terms of new market opportunities, MGAs are already starting to capitalise on insurtech, and when new products arise through strong relationships with their broker partners, MGAs have the bandwidth, the underwriting knowledge and the expertise to build those products and manufacture them themselves.
Q: MGAs have been referred to as ‘the rockstars of the insurance distribution system’. In your opinion, what are the top three benefits that MGAs bring to the table?
A: Deep underwriting experience and knowledge in their particular sector. That really is immeasurable. That’s why insurers and capital providers want to engage with MGAs first and foremost, because they do have very deep, specialist underwriting knowledge. That’s the pillar that MGAs want to build their business on, and it’s non-negotiable because it delivers financial benefits to all stakeholders.
If I were looking through an insurer lens particularly, the next thing I’d address is their speed to market, the innovative thinking, being ahead of the curve in terms of product delivery, distribution, and operational efficiency. Insurers can rest easy knowing that they don’t need to reinvent the wheel, this is just what an MGA can bring to the table immediately – and that’s on top of their underwriting expertise! Through natural agility and their market barometer, an MGA will also be first to pick up on customer habits, and therefore they will be able to share market knowledge and shifting trends in the market with their capacity partners, alongside recommendations for how that opportunity can be capitalised.
Q: There’s a lot of conversation at the moment around nurturing young people within the industry and making the sector attractive to new, incoming talent. You also spoke about the ‘Next Gen’ breakout session which you chaired at the MGAA Conference. What’s next for that working group?
A: We reconstituted the MGAA Next Gen group about 18 months ago, and we’re delighted that AXA XL have agreed to provide their sponsorship and endorsement. We’ve got five members, but we’re looking to expand by putting together a dynamic group of individuals from a range of backgrounds, whose role is to share their experiences by passing on knowledge and opportunities which exist within the MGA community. We hope that this will appeal to younger people and make the MGA community more attractive to them as the future of our industry.
This group has been instrumental in the compilation of the MGAA D&I policy – we had a session on that at the conference. They’re also going to be looking at our ESG policy in the very near future. The MGAA and its members are really happy to support these areas which are of crucial importance to the next generation, and support from AXA XL in the form of sponsorship is invaluable in terms of attracting more people into the insurance community, critically educating the uneducated in the ways of the MGA ecosystem.
You can keep up to date with all future MGAA events by monitoring their webpage here.