A lot of attention has been drawn to the digital developments that are being undertaken by insurers in the direct marketplace, but whilst direct is an important market, transformation of the indirect channel is also deserving of more attention.
According to the latest ABI data 48% of motor insurance premiums and 76% of home insurance premiums are purchased via intermediaries (excluding aggregator web sites).
Over half of motor insurance (52%), and a fifth of property insurance (24%) is purchased directly by consumers, including sales via a price comparison website. Source ABI Website November 2016.
Often overlooked in this supply chain is the Managing General Agent (MGA) marketplace, even though they play an important part in insurers’ business models. Experts at accessing, assessing and underwriting insurance for niche books of business, MGAs act as the middle layer between insurers and brokers. The growing adoption of Internet of Things (IoT), for instance, is creating a lot of data insight from connected devices, which can enable MGAs to offer personalised usage based insurance products. This new world of hyper-connectedness, where the primary purpose of the ‘Thing’ is not insurance related, can enable MGAs to add value to their product design and pricing to enable their distribution partners to tailor their services to the individual, whilst providing their Insurer capacity provider partners with the risk analysis necessary to satisfy commercial and regulatory arrangements.
In order to make sure that MGAs can serve this disparate supply chain to market they need to be able to provide products that are tailored to the needs of their intermediary’s customers and clients’ expectations which are often shaped by their digital experiences with sophisticated companies in other sectors, such as ecommerce retailers and service providers such as Uber.
Many MGAs find themselves working on multiple, outdated legacy systems that were not designed for their business model, making the ability to react to market conditions, launch new products or reach new markets a difficult one, impeding growth and adding cost.
The key question here is how can MGAs continue to innovate to be able to compete successfully in this dynamic marketplace?
Many new digital business models, particularly newer start-up businesses, are challenging the long standing assumptions about which applications should now be considered no more than a utility which can be purchased in the same way as other infrastructure. They are moving to a consumption based model to deliver the application functionality required by the business. The emerging concept of ‘Platform as a service’ - enabled by the exploitation of cloud computing technology and financial models coupled with modern application platforms has enabled these start-ups to establish their operations at a fraction of the cost and time it would have taken in the past.
This approach not only reduces costs and risk, but also can allow MGAs to better respond to shifts in business configuration and customer behaviour and ensure a long-term competitive advantage. By using technology as a driver, not only as an enabler of business change, MGAs will be able to accelerate digital transformation and ensure continued proposition and service differentiation.
For more information on CGI’s digital ready Platform as a Service offering called Evolut1on.