Harnessing technology to transform the insurance industry
11 July 2018
Jason Anthony, Founder and Chief Executive of MGAM
MGAM Ltd is one of the fastest-growing managing general agents in the London insurance market, providing underwriting services to carriers, using the latest insurance technology solutions, to manage and process coverholder and binder business, data and back-office services particularly suited to high-volume, low-cost business.
MGAM has written £13million in GWP from coverholders and clients since it began trading in late 2016, and has been critical in allowing carriers and clients to tap into new markets and establish new distribution channels. Using its specially configured integrated management system, the MGAM solution incorporates a bordereaux data-management solution, coverholder management system, a comprehensive reporting platform, an insurance broking accounts system and an online quote and bind portal.
The key benefits of using MGAM are:
Improved underwriting performance
The comprehensive nature of the systems designed by MGAM means that risks are thoroughly evaluated quickly and accurately. The systems are perfectly designed for low-cost, high-volume business.
Better client service
A complete software solution for bordereaux processing and management, standardising large amounts of bordereaux data, quickly importing and converting multiple data formats to a single template.
Data is cleansed and checked and validated against the binder terms. Enhanced reporting makes processes transparent, rendering risks visible and boosting efficiency and profitability.
Allows coverholder to meet requirements for Solvency II Pillar 3.
Provides a managed solution for workflows and processes of coverholder approval, due diligence and monitoring, as well as audit management and binding authority management.
Offers fast and efficient solution to data analysis and management in real time.
Provides a bespoke IBA system designed to manage distribution costs amongst stakeholders through efficient data collection, collation and reporting and capable of handling high volumes of bordereaux transactions, managing data quickly and accurately.
New income streams for coverholders
Allows for effective targeting of niche SME business streams.
MGAM – The new approach for brokers to maximise profits from writing high volume low margin business
Hello, and welcome to Business Reporter's The future of Insurance Campaign, hosted by the Telegraph Online. I'm Alastair Greener. Today I'mgoing to be joined by Gareth Eggle from Flint Hyde as we talked to Jason Anthony from MGAM as he takes the hot seat.
Good morning, gentlemen. Thanks for joining us. Jason, I want to start off by asking you, what are the big market forces that are affecting theinsurance industry today?
The insurance industry, Alastair, has many problems. Specific to MGAM, we transact business in the SME market. That's high volume, lowpremium, and our whole proposal is working with insurers and insurance brokers in order that they can transact more business at a loweradministration cost.
So what are the issues there? What's preventing insurance brokers dealing with SMEs? What's preventing you from being successful in thatenvironment?
It's the cost of administration of the product. There are the 5.3 million businesses in the UK who employ up to 10 employees. By their verynature, they're small premium. To transact that insurance costs the insurance brokers more than the issuing of the policy.
So therefore, it gets to the point where you don't even bother.
Lots of insurance brokers are just pushing this business away, and that creates a huge opportunity for people who've got a tech platform.
So what do MGAM do to allow that tech platform, as you call it, to operate.
Our platforms have actually developed into an ecosystem. So for insurers, we can take the compliance and the regulatory function and put itonto an IT platform as a process. Generally speaking, insurers, that's a very, very costly process that requires the employment of a largenumber of individuals. For the insurance brokers, where our quote and bind platforms allow us to put product out, whereby they're able to quote,bind, issue the policy, issue the invoice all on one platform.
So I want to bring in Gareth at this point. Maybe he has some questions that you want to ask in terms of this model-- this operating model.
Yeah, absolutely. I mean, you mentioned the distribution challenge. Obviously, getting in front of the SMEs is something which is going to bedifficult. Increasingly we've got a connected society, and people are utilising their own means to access products that are available. How are youovercoming that in terms of working directly with the brokers?
The brokers still hold-- so control is probably a better word-- a lot of this SME business. So putting white label products that allow them toadminister the business at a much lower cost is attractive. But also, working with the alternative distribution, nowadays a lot more people wantto buy their insurance on an app, on an on demand basis, and working with the Insurtech startups that are transacting business on that base isvery fertile ground.
Absolutely. I think the aggregated model is the one that's most mature in the UK marketplace when it comes to consumer lines of business. Andmany insurers will consider consumers and SMEs to be fairly similar because of the size of the premium.
But the problem with the aggregated model is that it allows the insurer to put out the product that they want to sell, but it doesn't give the client,the ultimate policyholder, the ability to buy the product that they want.
A good tool within your proposition to be able to manipulate the product's base to your own pre-identified needs as a customer.
Absolutely. So we work across many distribution platforms. We work in very traditional, where the client, buying an annual policy is perfectlyacceptable and that's what they demand. But the zero hour workers don't know what they're going to be working in the next 12 months, andthey don't want to pay a premium our at the beginning of the year not knowing how many hours they are going to work. They want to buy aninsurance policy that services them for the hour that are working, and technology allows us to do that.
I'm interested in the numbers here in terms of the amount of business that you can do, how the model actually makes money, and then roll thatout to become a profitable business.
So there are 5.3 million businesses in the United Kingdom that are employing less than 10 people. So the industry is vast, and the manner inwhich we make it cost effective is simply by putting the product onto an online platform determinant on that policyholder wants to buy his policy.
Give me an idea of the size of the potential business out there. A lot of insurers are maybe ignoring at their peril the potential from SMEs. Whatsort of figures do you think there?
The opportunity and the figures are huge. At the moment, the manner in which the policyholder has access to buying the policy is a bit likeknitting spaghetti. But if you look at, take Amazon as a platform, it's much more cost efficient to go online to buy a product. It's a retail product,but insurers are trying to sell and insurer product. And the savings are comparable to that we've seen in Amazon, in Alibaba, in Uber. Thoseplatforms that have brought so much cost-saving and efficiency to those industries can be brought to bear in insurance.
So there's a couple of points that you've raised around consumer expectations, which brings back the thoughts of instant gratification that oftenget discussed when considering the millennial generation and their being able to go online and date someone at the tap of their thumb. Thechallenge for an insurer when they're delivering that kind of immediate response is, the strength of what to insurer offers comes down to theirability to understand the exposures over a period of time and then to balance an underwriting decision based on your risk during that totalperiod of time. If you're only insuring yourself for a set period of time, the price would arguably be higher but for a shorter period. So you mightbe paying less ultimately if you have lots of small projects that you're doing-- because you mentioned the zero hour contract work, for example.
However, how does the insurer then justify to themselves making it work with their own balance sheets?
Because it's much better in fact, because the premium is fully earned after the [INAUDIBLE] of the work that the client has done. So once theycan get themselves into the mindset that this is much better for them, then in actual fact, they can be much more agile with the capacity thatthey employ.
With regards to the products that you're pushing as well-- sorry to change tack a little-- you were talking about the ability to be able to shapesome things specifically for the consumer's demands. How are you doing that? Is it a modular project where you can have lots of little bits thatyou can add in or take out depending upon your personal needs that you identify as an individual, or the broker identifies through their work withthe client?
So remember, MGAM is a you know B2B platform. So as I said earlier, we are working with traditional distribution but we're also working withthe new Insurtech distribution. So we work with the Insurtech distribution on a demand basis.
So, for example, we've just come out with an hourly public liability insurance for food career. Now, we work with the broker in that regardbecause of the app that they produce. But it's MGAM who are driving the change in the policy.
Tell me a little bit about the algorithms that you obviously must use to allow this to become viable for you. You just described there this hourlybasis and so on-- incredibly complex if you didn't have some form of AI involved in that.
So we employ our own analyst in order that we can take the annual data and break it down. When you take an hourly policy, if you extrapolatethat onto an annual basis, the chances are the premium would be higher. And so there will be individuals who, they will want the annual policy.But there are others who want the flexibility of buying the hourly policy. The key is to satisfy the demand and put the product, so it doesn't matterhow the consumer wants to buy the product, he's got options.
Jason, you have your own depth of experience within the insurance sector, and obviously have the ability to communicate well with theincumbent market who have their own particular style, let's say. Many of the Insurtech firms that you're alluding to, they simply don't have theability to talk the language of the incumbents. Are you providing that bridge?
MGAM'S work working very well with those new startups. And you've hit the nail on the head, because we are working with a number ofstartups who've gone and had a conversation with an insurer and failed. And coming to talk to MGAM has enabled them to get access tomarket, which they wouldn't otherwise have got.
So is your strategy in the short term to try and attract more of those Insurtech firms, those startup organisations who've maybe got a fancydistribution idea or an alternative product idea, give them the ability to be able to engage with the incumbent players who obviously have themoney at the end of the day, have that risk capital to deploy, but don't necessarily have the means to get to the customer?
Completely. But we also believe that there's a well-established distribution and that we can work with them. We can give them white labelproduct, which means that they get in an IT platform that otherwise they wouldn't have. So that enables them to service their existing book.
And what you find, is that they have a breadth of risk-- a portfolio of business that we like to underwrite. What you find with the tech startups,which is another reason why they find it difficult, is their monoline product. And that makes it very difficult. So coming in through MGAM enablesus to talk to the insurers, and say, look, we're providing a portfolio of business here on various distribution platforms. That creates a much betterrisk, so supporting MGAM to underwrite this distribution is far better than trying to do it indirectly.
Tell us a little bit more about MGAM. Who are you exactly? Who are the experts behind it? And how do you see the team growing?
So MGAM, in actual fact, the shareholders generally come from the insurance market. And that gives us access both to distribution and toinsurers. Myself, I've done 30 years in insurance. I've worked in many insurance markets, but primarily focusing on UK SME. That's whatMGAM is concentrating on.
We've invested heavily in IT, so our CIO comes in from a broker background. He comes in from an accounting background. And then we alsohave an operations director who's worked in the cover holder insurance broker market. So between us, we're covering all aspects of theinsurance transaction process. We come from underwriting backgrounds, we come from It backgrounds, and we come from brokerbackgrounds. So pulling that together we know what the problems are, and we've looked to address them before we put our products out intothe market.
Just to put myself in the role of the consumer for a moment, if I'm buying a product that is ultimately transacted through this platform, we'vespoken a lot about the front end here. Obviously, if I'm buying insurance, I want to buy it so that a claim gets paid out, and it gets paid out in timewith minimal fuss, and I don't have to worry about going through lengthy legal negotiations and everything else. Is that something which you'reproviding additional assistance with as well?
So the MGAM platform goes from the very start of from the compliance and regulatory process that the insurance brokers have to go through toget the insurance capacity, through to the boardroom management, through to the IBA, through to the claims process. And in terms of theclaims process, we offer a 24/7 claims service. And the manner in which we've done it, is in order that we want to become more agile in the datathat we've received. So we're working with a very specific claims administrator who's invested heavily in their own IT infrastructure in order thatwe can be much more detailed in the way that we handle the claim and therefore have be much more efficient.
So let's ask a little bit about the development of your product in terms of where you are at the moment, where you see it going, and what you'redoing to future-proof it, and to keep your edge in the industry so that you're one step ahead of the competition.
So having an IT strategy actually somewhat future-proofs your business. Insurance is well behind other industries, be it Fintech, be it retail. SoMGAM is constantly driving increased product. So we're working with insurers who want us to take their products and put them onto an onlineplatform. We're demonstrably seeing increased take-up in our [INAUDIBLE] systems, demonstrably seeing take-up in our policies. And I thinkthat that will take us forward.
We're very agile. We're a startup. Insurers, generally, it's very difficult for them to be agile. They're hampered by these large balance sheets. Soworking closely with an MGA enables them to access distribution that they wouldn't otherwise be able to get to.
A question with regards to the business as well-- what's the ask? What do you need from potential partners, from potential investors, frompotential advisors? Is there anything specific that you'd feel that you need right now to really take this business to the next level?
Absolutely. So MGAM, we've been going for three years. The first year was about building the tech and tweaking it in the second year. Thesecond year was about putting our insured partners in place. And the third year is about growing the business in the knowledge that we've gotproof of concept.
Our online platforms have been out now for seven to eight months. We've been underwriting for 12 months. So we now know that there's ademand for the product and service we offer. So we're looking at opportunities to work with insurers who are interested in working in theInsurtech environment. We're interested in talking to investors who want to come behind MGAM in order that we can accelerate our growthpatterns.
We absolutely know from what we've seen, that this business is going to be successful. Where we can take it to-- I'd like to look at providingmore product in the UK. We're talking to individuals with regards to taking MGAM into Europe. I think that there's huge demand. Different areasof Europe, they're very traditional in the manner in which they buy their insurance, and I think that's a large market that we can service. And inactual fact, we've been talking to alternative distribution, be they affinity groups, in how we can put our product into the affinity group in orderthat their clients have a much better journey in the acquisition of the insurance.
Well, it's really interesting to see how the SMEs, all of a sudden, can be very much more a part of the insurance industry that they're currentlynot, and how you play a part in that. Gareth Eggle from Flint Hyde, thanks very much indeed for joining me for asking questions, and JasonAnthony from MGAM for being in the hot seat--
Thank you very much.
--and for really giving us an insight to this side of the industry.
Thank you very much.