Special Research | Reflections on the MGA Model under the Digital Transformation of Insurance

The MGA in the insurance industry is an imported product, namely Managing General Agent, which means "Management General Agent" in Chinese, and is a special type of insurance agent or broker. The function of MGA means that the insurer authorizes its underwriting authority to the agent, and the agent signs the insurance contract on behalf of the insurance company after authorization. This model can provide complete services such as sales, underwriting, underwriting, billing, claims settlement, and risk management. .

1.Behind the hot financing of international MGA

As of the end of 2021, a total of more than 20 MGAs have completed financing, with a total amount of more than 1 billion US dollars, of which British and American financing are mainly used, including British auto insurance MGA Markerstudy Group completed $250 million in financing, British pet insurance MGA Bought By Many completed $350 million in financing, San Francisco-based cyber insurance MGA Coalition completed $205 million in financing. From the perspective of business division, MGA financing is mainly in the field of property insurance.

2. Development Trend of Domestic MGA Model

2.1.The orientation of regulatory policies shows a positive trend

In the past, the domestic insurance market often adopted an extensive business model that focused on channels and agents. Although MGA is still in its infancy in China, it will definitely be a new form that insurance companies and the insurance industry will focus on in the future. At present, many domestic insurance technology innovation companies are also actively exploring. Recently, the Beijing Bureau of Banking and Insurance Regulatory Commission issued the "Work Plan for Supporting and Regulating the Development of Managed Insurance Intermediary Business (Draft for Comment)", which not only supported the MGA, but further clarified the work plan for the pilot, and proposed to explore the managed insurance intermediary business. The main objectives are as follows:

The first is to guide the Beijing Insurance Intermediary Association (referred to as the Intermediary Association) to establish an industry review mechanism to identify professional insurance intermediaries participating in the pilot program of managed insurance intermediary business in batches. Strive to spend three years to explore the formation of a batch of new models of managed insurance intermediary business that can be promoted, replicated, high-value, and high-quality.

The second is to cultivate and form a number of professional insurance intermediaries with distinctive professional characteristics, leading advantages and outstanding value, and have a certain reputation and influence in the national and international markets.

The third is to accelerate the transformation and upgrading of the insurance intermediary market from an "extensive, resource-based, and channel-based" growth model to a "professional, technological, and management-based" growth model.

2.2 MGA integrates into the insurance ecosystem with the help of insurance technology

Technological innovation is changing the business model of my country's insurance industry, especially the intermediary industry. The use of new technologies in insurance technology is conducive to promoting the value creation of insurance intermediaries and playing a greater role in the insurance industry value chain. In the future, specialization and integration will be the key requirements for various insurance intermediaries, and specialized division of labor is also the key to improving the profitability of intermediaries. MGA can take advantage of its huge information flow and rich resources and data to build a standardized platform for my country's insurance industry that it urgently needs, and through this platform, it can achieve the purpose of improving work efficiency, reducing operating costs and expanding the scale of the industry. Specifically, it is divided into the following points:

 First, with the development of insurance technology, MGA can improve risk identification capabilities and reduce operational risks.

Second, with the help of insurance technology, MGA can positively improve its insurance claims processing capability and further obtain relevant claims authorization from insurance companies.

Third, MGA can coordinate with insurance companies to expand the scope of authorization according to the actual situation of the institution's own specialization and technical capabilities.

The fourth is to integrate emerging technologies to help insurance companies achieve risk reduction management and market innovation and incremental development.

The fifth is to further improve industry standardization to stimulate the advantages of MGA and promote benign iterations.

3. MGA is based on the value of the insurance industry

MGA can provide more specialized services for insurance companies. The insurance company cooperates with the professional MGA, and the MGA underwrites the insurance business, thereby reducing the cost of business development, while the insurance company focuses on professional risk management. At the same time, MGA provides customers with insurance product consulting services, introduces the differences between different insurance products in detail with its professional knowledge, selects the most suitable products for customers, and improves the efficiency of insurance transactions.

From the perspective of cost, MGA can reach a wider range of customers, reducing the cost of information collection and risk identification. MGA's demand for professional talents and the construction of an extensive sales network can reduce sales costs. In terms of claims settlement, most MGAs are not authorized by insurers to settle claims. Small and medium-sized insurance companies or large insurance companies choose to outsource claims settlement to TPA (Third Party Administration) in some professional fields that they are not good at to help insurance companies. Manage claims control fees and achieve preset loss ratio targets. If the MGA is also authorized by the insurance company to manage claims, the insurance company will often designate the TPA to participate and sign a tripartite agreement with the MGA to jointly serve the insurance company.

We have seen that some insurtech companies in the market provide one-stop management + insurance system solutions for insurance companies and insurance intermediaries based on the MGA + SaaS + TPA business model. Strive to realize the "three-in-one" of insurance, intermediary and service network. Bundled sales of SaaS, MGA, and TPA to insurance companies may create higher value.

In the next step, insurance companies can make full use of the unique advantages of MGA to realize a reasonable division of labor in the insurance industry chain, promote insurance companies to fully exert their functions, realize the progress from risk equalization management to risk reduction management, and improve the competitiveness of insurance companies .