What's Happening?
Managing General Agents (MGAs) are encountering difficulties due to conflicting demands from brokers, who are seeking both 'carrier-grade governance' and 'rapid product innovation.' A survey conducted by Corin Underwriting highlights a credibility gap, as brokers prefer placing high-hazard risks with MGAs backed by A-rated carriers. Despite the demand for AM Best Performance Assessments, only a few MGAs have pursued this evaluation, which is seen as a credibility stamp by brokers. The survey indicates that regulatory pressures and rising rating fees are significant barriers to growth for MGAs and carriers, potentially leading to capacity security issues.
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Why It's Important?
The conflicting expectations from brokers could impact the MGA market by creating a gap between what brokers demand and what MGAs can deliver. This situation may lead to increased pressure on MGAs to secure backing from A-rated carriers, which could be challenging due to regulatory and financial constraints. The credibility gap might affect the ability of MGAs to attract business, potentially influencing the insurance industry's dynamics and the availability of niche products. Stakeholders in the insurance sector, including brokers and carriers, may need to address these challenges to ensure market stability and growth.
What's Next?
MGAs may need to adapt by enhancing their governance and innovation capabilities to meet broker expectations. This could involve pursuing AM Best Performance Assessments more aggressively to bridge the credibility gap. Additionally, industry stakeholders might explore collaborative solutions to address regulatory pressures and rating fee challenges. The evolving demands could lead to strategic shifts in the MGA market, influencing partnerships and product offerings.
