Why some tech vendors are becoming MGAs

Insurers could distribute coverage through technology firms that adopt the managing general agent model, a Montreal expert for a venture capital fund observes.

“Some technology startups are adopting the MGA model to partner with a carrier or reinsurer to distribute their product,” said Laviva Mazhar, investment associate at Luge Capital.

“Some tech-driven MGAs are partnering with brokers to give those brokers access to faster policy distribution. We are seeing that in life and health. I could see that on the property and casualty side as well, with products that might not be easy to underwrite or deploy fast enough in an online digital fashion,” Mazhar said in a recent interview.

Canadian Underwriter asked Mazhar how technology has changed distribution models and how technology will change distribution models going forward.

Toronto-based Allegory Insurance is developing a mobile app to offer usage-based auto insurance to consumers through an MGA model, Luge said in Status of the Canadian Insurtech Landscape, a report released in late 2020.

Luge Capital, which has offices in Montreal and Toronto, provides funding to insurtech and fintech startups. The investors who ultimately provide the money to Luge Capital’s fintechs include Industrial Alliance, La Capitale, Sun Life and Desjardins, among others.

The trend of digitization and digital distribution of insurance started a few years ago, said Mazhar.

“Technology will be helping intermediaries automate more of their administrative workflow tasks that today require manual work. Think of billing the client, entering data, re-entering data on the back end or calling the underwriter. As technology automates more of those tasks, the brokers and other intermediaries will have more time to focus on sales and business development and also to act more as risk advisors to their clients,” Mazhar told Canadian Underwriter.

The insurance industry is often described as “slow-moving” when it comes to innovation and digitalization, Luge Capital said in its Status of the Canadian Insurtech Landscape report. This is due in part to aging information technology infrastructure, high barriers to entering the industry, and heavy regulation, said Luge Capital.

“In 2017, the broker channel contributed 64% of the direct written premium in the P&C industry. As some insurers shift from legacy technology to newer infrastructure, increased flexibility of technology will allow them to distribute home insurance more easily,” Luge said in the report.

“Brokers could potentially free up a lot of time, which they currently spend on admin work, to instead act as a risk advisor to a client. That is how they would drive value to their clients and stay relevant,” said Mazhar.

Feature image via iStock.com/wutwhanfoto