Market Size and Dynamics
Even though responses to the questions on the perceived size of the PA/MGA market continue to reflect it as large, the respondents this year see it as being smaller than in any time over the course of the last four years. Historically, the results of our survey reflected a majority opinion (37 percent to 40 percent) that this market segment was in the USD30 billion to USD40 billion range. This year, only 24 percent reflected historical results, while 37 percent (up from 21 percent a year ago) believe it to be USD20 billion to USD30 billion.
While the majority of the respondents believe the PA/MGA marketplace today is smaller than it has been in prior years, they do believe change will occur and that it will grow. Fifty-one percent of respondents believe this segment will grow, while only 8 percent see it shrinking. These perceptions may be a result of the fact that 36 percent of the respondents are experiencing a greater number of new business opportunities in their pipelines, while 43 percent are holding steady year over year.
Program marketplace profitability was addressed again this year with 78 percent of the respondents believing the combined ratio for the PA/MGA market is greater than 95 percent and 32 percent believing it is over 100 percent. While this is fairly consistent with last year’s results, it represents a significant swing in opinion from two years ago when the majority of the respondents (48 percent) felt the combined ratio was in the range of 90 percent to 95 percent, and only eight percent saw it as being over 100 percent. So, while the program marketplace is expected to remain profitable, the extent of the profitability has changed.
Five Greatest Market Challenges
Balancing profitability with market share continues to challenge carriers writing PA/MGA program business. This market dynamic was reflected in the level of responses for maintaining rate level (57 percent) and new business production (41 percent) as the largest challenges.
Because of the dynamics of the insurance industry as a whole and the program market segment in particular, the challenges rated as important should be considered collectively rather than individually. A company’s rate filings will affect the rate level it is able to charge. This, in turn, will determine how competitive its product is in comparison to new competitors and, ultimately, if it will be able to maintain or increase current premium levels. This year’s respondents are obviously working through this set of interrelated challenges.
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Market Size and Dynamics