So you want to start an MGA?
Updated: Oct 20
This is the first in a series of blogs containing excerpts from my forthcoming publication, 'The MGA Book'.
So you have an idea.
But are you really ready to start your MGA?
Finance and capacity are the last things you need to worry about at this stage.
Firstly you need to create your vision and plan.
And this plan needs to focus on how your MGA will create value.
This is not a full business plan. It is what I call a pro-forma. A single sheet of paper to help you decide "do I have enough yet to create an MGA?"
Here is a copy of the ‘MGA pro-forma’. I’ll discuss each of these critical questions in more detail in subsequent blogs:
"Who is my target customer?"
"How do I distribute to my customer?"
"What policy(ies) am I looking to sell/underwrite?"
"Why will my target(s) buy from me?"
"Which existing insurers provide policies to my target customers?"
"How will I add greater value than existing insurers?"
Beware of pyrrhic victories
Sometimes a certain class of insurance will look underserviced, with little or poor insurance availability and with some level of technology tardiness.
Be careful. In the UK there are a handful of classes that have proven incredibly difficult to write profitability. And many times, they get underwritten through an MGA, until the binder is withdrawn.
Beware of entering a class that has always been challenging for insurers to make a profit. Insurance companies are full of bright, experienced people, so what makes you better?
Unless you really do have the magic bullet, stay clear and aim for a different class.
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The author, David Hughes, is the founder and CEO of the Insurance Data & Analytics consulting business mulberryrisk.com