Conscious decision or the sleepwalk strategy?
At the recent TINtech London Market event the Folio team presented our research into the size and scale of the delegated Insurance market prompted by the tremendous growth we have witnessed in recent years that has cemented delegated authority as a hugely important channel for insurers.
There were lots of questions afterwards, and it quickly became apparent that there were some surprises in the data. Many had assumed that the delegated model still made up a relatively small proportion of our market, and that there was typically still only a small amount of boutique players out there.
They were interested to find out that some insurers can have up to 60% of their business distributed on a delegated basis, with the overall market seeing nearly 40% of business delegated on average. This led to some interesting questions; when did this growth happen and was this a conscious strategy or has the delegated channel grown by osmosis?
The questions we were being asked highlight a common oversight in the industry, where delegated business has been underestimated in its scale and importance. The realisation that a much higher portion of the market operates through delegated authority arrangements should prompt a revaluation of its strategic importance, but this doesn’t seem to be happening. There just doesn’t seem to be same rigor and strategic planning for delegated business as is customary in the open market.
The delegated channel has always been perceived as a little less glamorous, but the research shows that it’s a lot more interesting and provides a fertile ground for innovation, a place to test new products efficiently, and a way of moving to portfolio underwriting allowing one underwriter to control more books of diverse risks.
On the subject of innovation, the MGAs themselves are at the forefront of using advanced technology to support their business models, the use of sensors, augmented risk data and customer experience tools are rife. MGAs seem to have a less complex business model, allowing them to get closer to their clients and, therefore, understand their wants and needs more than most.
With the adoption of these breakthrough technologies and the need to increase efficiencies for carriers, there is actually a very strong argument that the delegated channel should continue to grow in importance.
Unfortunately, those trying to increase the importance of delegated are facing a number of blockers, with the current theme being to ‘fix delegated’ through better data or the elimination of bordereaux. But this is akin to building a faster horse and is only fixing part of the problem.
To really leverage this channel, and to differentiate from the competition, you need to spend time defining a very clear strategy, concentrating on the whole lifecycle from capital management, through to MGA and contract on-boarding, all of the way through to data transfer, reporting and portfolio management. Additionally, our research shows that there isn’t sufficient collaboration between MGAs and their capacity providers and there’s little or no conversations about how they want to operate and what would set the relationship apart.
In a recent article published for The Insurance Network we talked about the importance of a North Star, a vision for how we want to operate that everybody can get behind. Maybe it’s time we started by taking a step back and getting our arms around something we already do, something that is growing in importance and scale day by day.
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