Since 2005, MGA/PA interest in smaller programs has grown profoundly. In 2005, only 25 percent of survey respondents sought programs of USD10 million or less. This year, the result was much higher, having almost doubled. The middle of the marketplace is getting squeezed, as MGAs/PAs seek growth in places where they may not have looked in the past.
Target Program Size
Interest in growing most commercial lines was low. General liability stood out, with 67.5 percent of respondents indicating an appetite for it. Property, inland marine and auto liability also resonated with many respondents – at 50 percent, 47.5 percent and 42.5 percent, respectively. For the remainder, less than a third of survey participants indicated an appetite for growth. Generally, we see MGAs becoming more sophisticated as they focus on more complex commercial risks using cutting edge analytical and underwriting tools.
Interest in growing personal lines was also modest, with umbrella and auto lines garnering 7.7 percent of the attention of respondents each. There was no indicated interest in growing medical lines of business, and only 2.6 percent of survey participants expressed an appetite for more homeowners business.
Carriers are still flexible with regard to the services that MGAs/PAs provide, including system use and claim handling. Ninety-eight percent of respondents expect the MGA/PA to underwrite, rate, quote and bind the business, as well as issue and service policies, up slightly from 95 percent in 2009 and showing another year of growth relative to 2008’s 80 percent. Loss control and premium audit services remain important to some carriers, securing 47 percent and 37 percent, respectively – roughly unchanged year-over-year (as it was from 2008 to 2009).
With regard to monitoring activities, the long-term trend reflects an increase in carrier
operations management, as they seek to manage underwriting and claims more effectively.
Interestingly, since 2005, carriers have been pushing more work to the MGAs/PAs, including actuarial filings and reporting. It seems likely that this is the result of cost management efforts by insurers, who seek to reduce expenses by moving workload to the MGA/PA level. Yet, insurers are becoming more flexible in regards to the use of their systems by MGAs/PAs. In 2005, 57 percent of carriers required this, compared to 6 percent this year. This reflects an effort by insurers to entice MGAs to do business with them in an effort to increase revenues and affect growth.
Click here to read Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey, Part I: Market Size, Challenges >>
Click here to read Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey, Part III: Reinsurance Purchase, Respondents, Acquisitions >>
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