“I don’t think we or anybody else really knows what they’re doing when writing cyber,” said Warren Buffet at his firm’s annual meeting in Omaha Neb. “We don’t want to be a pioneer on this.”
Buffett’s view on the cyber realm as “unchartered territory” is a reasonable and accurate description. But there are a fair number of emerging tech-focused MGA’s supplementing traditional underwriting practices with real-time analytics and using tech-focused approaches for risk management. Their hope is to reduce exposure, decrease prices and cut administrative costs for cyber coverage and other traditional lines of business.
This is specifically true in the cyber market due to a lack of historical data as well as the constantly evolving nature of the risk.
Over the last year, we’ve seen numerous tech-focused MGA’s surface with a specific interest in the cyber insurance market: Coalition, Evolve MGA, Envelope Risk, Ascent, Cyber Policy, Corvus and many more. While they all have something different to offer, much is the same: cyber expertise, access to data, risk management strategies, and a view of insurance that is much different from the traditional players. Overall, these newcomers claim to leverage technology to better determine risk and price cyber more accurately.
Coalition, for instance, is licensed in all 50 states and DC, and has the authority to rate-quote-bind all without a single (human) underwriter. Backed by Swiss Re and Argo, Coalition also builds and provides free cybersecurity tools including anti-ransomware software to the businesses it works with.
Other cyber-MGAs, such as Evolve MGA and Corvus, provide brokers the data needed to help with the rate-quote-bind process and provide cyber insurance benchmarking and other intelligence to both brokers and policyholders.
“The MGA format is appealing to insurtech startups because it allows these startups to test the value of their competitive advantage…and control their vision without the large amount of capital required to form an insurance company,” explained Thomas Ryan, principal at Milliman. Additionally, their smaller size allows them to be nimble and act quickly and efficiently.
Established MGA’s have partnerships with insurtechs to underwrite more intelligently, innovate faster, automate processes and improve the customer experience. Traditional players also have something to offer, as emerging MGA’s are not always up to speed in the regulatory space and often lack “deep industry knowledge and expertise,” said Peter Staddon, managing director of the Managing General Agents’ Association.
According to McKinsey, 75 percent of funding deals in insurtech have been led by traditional insurance incumbents, signaling the importance of partnerships in its evolution. As a result, we expect to see more tech firms take the MGA route, ultimately creating opportunity for the traditional broker.