A lot of attention has been drawn to the digital developments that are being undertaken by insurers in the direct market but, while direct is an important market, transformation of the indirect channel is also deserving of more attention.
According to the latest Association of British Insurers data, 48% of motor insurance premiums and 76% of home insurance premiums are purchased via intermediaries, excluding aggregator websites.
Often overlooked in this supply chain is the managing general agent market, even though it plays 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 the Internet of Things, 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-connectivity - where the primary purpose of the ‘thing' is not insurance-related - can enable MGAs to add value to their product design and pricing thus enabling their distribution partners to tailor their services to the individual. And at the same time 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 must provide products that are tailored to the needs of their intermediary's customers and clients' expectations. These are often shaped by digital experiences with sophisticated companies in other sectors, such as ecommerce retailers and service providers such as Uber.
More than 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
Many MGAs find themselves working on multiple, outdated legacy systems that were not designed for their business model, preventing the ability to react to market conditions, launch new products or reach new markets, as well as 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 market?
Many new digital business models, particularly newer start-up businesses, are challenging the long-standing assumptions about applications which should now be considered no more than a utility to 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.
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