The MGA market continues to grow in the ever competitive and changing insurance landscape.
I have recently interviewed the CEO’s and leaders of several MGAs to discuss their views on various topics relating to the MGA market.
Today’s interview is with: Clive Nathan – Chief Executive, Underwriting – GRP
- Clive has responsibility for GRP’s Underwriting division. He joined GRP in April 2018 from Primary Group, where he fulfilled a variety of senior roles including Non-Executive Chairman of Rural Insurance and Executive Chairman of One Commercial.
- Between 2006-2016 he was CEO of Towergate Underwriting, having joined the business in 2003 as a Regional Managing Director.
- Clive began his career in 1987 as a graduate entrant with Commercial Union, where he had a number of different roles. He joined AXA UK in 1999 as National Broker Director and was involved in the acquisition of GRE that resulted in him becoming Regional Director.
- Clive is a past member of the CII Underwriting Faculty and was awarded Industry Achiever of The Year by Insurance Times magazine in 2012.
Q 1 What attracted you to the MGA market?
I have been in the MGA market since about 2005. At Towergate, I helped to develop and build what was Towergate Underwriting at the time – at one point the leading MGA in the UK or leading collection of MGAs. Previously I worked for insurance companies, at AXA and Commercial Union, but I also ran a broking business at Towergate. MGAs attracted me because they are a hybrid of both. I could use my underwriting skills but also broking skills. I often say that in an MGA you have to think like an insurer but act like a broker. Using both sets of skills was important to me. I also liked the idea that we could develop niches within the MGA market, which is not always the case in mainstream insurers because niches may not be big enough to be attractive. In the MGA market you can look at holiday homes, non-standard home insurance or different types of farm insurance that are more niche than mainstream. It’s exciting building these books of business rather than having to scale up which tends to be the case in a big insurance company.
Q 2 How does working in an MGA environment differ from any other type of insurance business?
I think it is a unique environment. Everything hinges on your underwriting result. In some ways that is similar to an Insurance company, but different in the way that in an Insurance business you are in control, to a certain extent, of your own destiny. In an MGA you cannot afford to have poor underwriting results for any length of time. An insurer may be able to see that over a longer length of time but in an MGA, you might be able to get away with one year where your results are not great but you really have to be forensic about delivering underwriting profitability or risk losing capacity. So in some ways it is probably more like a Lloyds environment than it is in a big insurance company environment. Big insurance companies may see things over a longer period of time like over a cycle, whereas in an MGA environment you really have to be profitable pretty much year on year. Alternatively, if the risk appetite is too restrictive you don’t grow and you have a different set of problems. It’s challenging but one I thrive in and really enjoy.
Q 3 What does it take to grow a profitable and sustainable MGA business?
I have nine key points on my board, nine things I believe that are the key to growing it. They are:
1-Underwriting, 2- Distribution, 3- Product, 4- Brands, 5- Technology, 6- Profit drivers, 7- Cost management, 8- Governance, 9- People.
You must have Good Underwriting, you’ve got to have good distribution, a range of products that ideally are not easily accessible elsewhere – so niche products. I think you have to have a brand that people recognise. You have to invest in technology and have the ability to harness technology. You have to focus on the things that deliver profit to you and your carriers, so not just underwriting profit, but also how do you make money for your carriers and for yourself? To be able to invest – are you able to sell added value products? You are selling risk management, so what are the things that drive additional profit? I think to be successful, you have to have a really strong handle on cost because I’ve looked at a lot of MGAs that have lost their way in terms of trying to have a similar investment profile of an insurance company that is 10 times their size. Efficiency is critical, so you need good cost management and you have to be well governed.We’ve spent a lot of time looking at governance structure, forward structure and so forth, to avoid any conflict of interest. Finally, you have got to have great people. Those are my nine things, I always talk about the nine ingredients that make a great MGA.
Q 4 What do you see as the biggest opportunity in the market?
In summary: harnessing technology to deliver data enrichment and analytics, in order to understand risk better and improve pricing. There is so much data out there! The biggest opportunity is to harness that data via technology and use it to underwrite with. If not, you will become too costly. MGAs must be cost effective and efficient. Some insurtech businesses use hundreds of different data enrichment points to inform their risk decisions.
Q 5 What is the greatest challenge?
Does technology become an opportunity or a threat?
The biggest challenge is, if you don’t – will you get left behind? Frankly my feeling is you probably will. In the short-term, capacity will be in short supply to MGAs unless you can deliver underwriting profit or deliver to an insurer something they can’t get themselves, otherwise why would they use you?
Also, the ability to deliver good underwriting results in order to be able to grow is a key challenge.
Q 6 What does the future hold for the MGA Market?
More consolidation of MGAs is inevitable, and I’m already seeing it in the market. There are quite a large number of MGAs, and what often happens is they reach a point of where it’s difficult to know what to do next? It tends to be around the £8 – 12m GWP mark where they wonder how to make the investment go on to the next level?
Vanilla MGAs will not be the future. People will be looking for more niche MGAs.
More insurtech businesses either coming to market as MGAs or teaming up with MGAs to provide capacity. More consolidation and blending of insurtech and insurer in MGAs could be the future.
Q 7 How has the MGA market changed in recent years?
There has been a lot of growth in MGA Market, whereas the wholesale broker market has remained almost entirely flat since 2005. During at the same time the MGA market has doubled in size. There are now more people setting up MGAs but although it has become easier to set them up it’s harder to make them successful. Also, you are now getting what you might call technology start-ups setting up as MGAs.
Q 8 What part will technology play in the future development of MGAs?
It is all about the use of data to inform underwriting decisions and leave the underwriters to make the value decisions. Instead of underwriters being processors. They are already doing it to a certain extent via postcode data, flood risk, subsidence, theft and social economics. We are getting so much information on businesses and people, you would have to be daft not to think that was the way forward.
Q 9 From a recruitment point of view, what is the attraction of working for an MGA?
For me, as I said earlier, you get to see both sides, thinking like an insurer but clearly remunerated like a broker. You have to understand how to run a business on the MGA side of things. Lots of MGAs are small so you learn quickly about running a real business, managing cash flow as well as profit drivers and how you understand your own P&L. It is a really attractive sector and gives you the best of both worlds.
Q 10 What advice would you give someone looking to start an MGA?
What are you bringing that somebody else has not already brought? What are you doing that is different and better? It needs to be about more than customer service and relationships which I hear a lot of. Why is your underwriting and technology, along with your people going to be better than the rest of the pack?
Right International are specialist Headhunters to the MGA/Insurance market and have extensive experience of supporting start up MGA’s, recruiting key individuals as part of the initial senior management team. We also have a successful track record of sourcing the top talent for market leading MGA’s. If you are looking to fill a key role, please contact me to discuss how RI can help.
If you would like to be involved in future articles, please let me know and I would welcome any feedback. Look out for the next interview coming soon!
All the best,
Gary Pike
Founder & MD
Right International Insurance Headhunters
At Right International our specialty is sourcing the top achievers for the Insurance Market.
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