Cost hinders digital trade for MGAs
Cost is the main barrier to managing general agents (MGAs) offering more digitally traded products, according to Laura Hancock, managing director of Yutree. This is a vital route for firms going forward, but the expense has prohibited many from doing so in the past. The cost of building an e-trade facility can be particularly high for MGAs using large systems like Acturis, which can make it difficult for them to justify the investment.
Hancock noted that building an e-trade facility can be a costly endeavor, particularly for those using large systems like Acturis. The cost can run into the hundreds of thousands, making it a significant investment for MGAs. This upfront cost can be a major deterrent for many firms, especially smaller ones with limited resources.
The high cost of digital trading has caused some brokers to abandon their efforts, despite initial investments. Hancock highlighted several brokers who embarked on the underwriting business journey but were forced to stop due to the expense. This not only results in a loss of investment but also a loss of potential revenue and market share.
MGAs must be sure of their return on investment to offer more digitally traded products. This can be a daunting task, especially for smaller firms with limited resources. The cost of digital trading can be a significant barrier to entry, and MGAs must carefully consider their investment strategy to ensure that they can generate sufficient revenue to offset the costs.
Some firms are finding ways to overcome this challenge. By investing in digital infrastructure and streamlining their processes, they can reduce costs and increase efficiency. This can involve implementing new technologies, such as automation and artificial intelligence, to improve operational efficiency and reduce manual errors.
In the middle of this digital transformation, the insurance industry is at a crossroads. The ability to offer digitally traded products will be important for firms looking to stay ahead of the curve. As customer expectations and market conditions continue to evolve, firms must be able to adapt and respond quickly to changing demands.
As the industry continues to evolve, it will be important to see how MGAs adapt to changing market conditions. One thing is certain, though: the cost of digital trading will remain a major hurdle for many firms, affecting their insurance losses.
Despite the challenges, many MGAs are committed to expanding their digital offerings. By doing so, they can improve customer experience, increase efficiency, and reduce costs.
Hancock noted that the key to success will be finding a way to balance the cost of digital trading with the potential benefits. This will require careful planning, investment, and a willingness to adapt to changing market conditions.
For now, the cost of digital trading remains a significant barrier for many MGAs. However, as the industry continues to evolve, it’s likely that we’ll see more firms finding ways to overcome this challenge and offer a wider range of digitally traded products.
They will need to invest in new technologies, such as cloud computing and data analytics, to improve operational efficiency and reduce costs. This can involve partnering with insurtech firms and other technology providers to develop new solutions and services.
