Imagine you are a small business owner who needs Cyber insurance now. However, amid this hurry, you end up filling in hundreds of forms and waiting for an underwriter to review your application during business hours, and after loads of phone calls and an odd number of weeks later, you receive a generic rejection letter. This can be a frustrating experience, isn’t it? Meanwhile, your competitors get approved in 47 seconds through an Insurtech MGA and pay a fair premium on the basis of real-time data analytics and move on with their day.
This is exactly where most of the traditional insurance models are rattling, and the revolution that is making it possible is Insurtech MGA.
What Exactly is Happening?
The traditional insurance carriers have built their empires on control, which includes controlling distribution, underwriting, claims, and every touchpoint in between. However, the fortress still crumbles. The MGAs in the Insurtech space are critically rewriting the business models with a whopping 80 percent of them now developing their own proprietary products, which are essentially focused on specialty lines and the emerging risks that the legacy carriers can’t or will not be able to touch.
The Insurtech MGA model is not just about an incremental improvement, but it’s a complete reimagining of the way insurance companies work. These are the digital-first entities that essentially combine the underwriting authority along with technological agility and create products that the traditional carriers would otherwise take years to build.
Why are Traditional Models Falling Flat?
The traditional Insurtech MGA models are essentially falling flat because of several long-standing operational reasons, which includes:
The Innovation Tug
The traditional insurance carriers have got a massive infrastructure Investment which have become the anchors around their necks. Their core systems are essentially rooted during the time when older technology was dominating the industry. However, as times changed, digital transformation in insurance took the baton. Today, the innovation in technology is not rooted in adding a mobile app to a broken process but also, it’s about essentially rebuilding everything from the ground up.
The Insurtech MGAs do not have a legacy system to maintain. Instead, they are built upon cloud-native architectures, leveraging AI in insurance for instant decision-making, and deploying the updates weekly instead of yearly. These are the organizations that receive a one-to-one ratio between the capital raised and the gross written premium, a critical metric that cannot miss the notice of traditional CFOs.
The Data Disadvantage
The traditional insurers are data rich, however; they lack advanced insight. With the decades of claims data sitting in incompatible systems, the Insurtech MGAs use real-time analytics for pricing the risk with surgical precision.
The future of insurance is not about having more data; instead, it’s about having much better data at the snap of fingers. The MGAs who essentially integrate telematics, IoT sensors, as well as behavioral analytics will be able to adjust the premiums in real-time, and that too on actuarial tables from 1987.
Where is the Embedded Insurance Revolution Coming into the Picture?
Some believe that Embedded insurance is the most important existential threat to insurance, and it’s becoming quite invisible. The Embedded insurance market is projected to grow from USD 156.06 billion in 2024 to USD 703.44 billion by 2029, at a compound annual growth rate of 35.14%.
Today, the customers are not just looking to buy “Insurance” anymore. Instead, they are in search of products which are perfectly tailored as per their needs. For instance, when you book a vacation rental or buy a concert ticket or lease a car through an app, customers expect the insurance to pop-up- in the most random ways and at any time. This is the modern-day customer expectation of 2025.
With the Insurtech MGAs, the carriers can cater to this need in no time as the technology makes it possible through APIs.
A Real-World Scenario
Lemonade, which is one of the most scrutinized Insurtech MGAs has completely reimagined their customer experience by putting AI at the core of its operations. The policyholders who have interacted with Lemonade AI-driven interface have reported that satisfaction has significantly shot up to 90 percent. But the thing that matters here is the shot in the customer base of Lemonade AI within just four years.
The secret here is not just technology, but it was about removing the fundamental conflicts of interest that are based on traditional models. When your profit does not depend upon denying claims, and you can seamlessly settle a claim in just three seconds instead of three weeks, and you can offer the coverage to millennials with zero paperwork- you will not just be competing on the same playing field anymore but would have created an entirely different game.
The Omnichannel Customer Experience Imperative
Modern customers are not distinguishing between channels; instead, they expect to have seamless experience across mobile apps, websites, voice assistants, chatbots and even through phone calls, where they will actually need them. An omnichannel customer experience isn’t a luxury feature anymore but its table stakes.
The Insurtech MGAs essentially build an omnichannel experience right from day one. The difference that lies here is that one feels like managing your insurance, and the other feels like having insurance that manages itself.
What’s Ahead?
Traditional insurance carriers have only two choices – either to become Insurtech MGAs themselves or to become the infrastructure providers who power them. The revolution is knocking at the door, and the only question is which side of history will you be upon when the dust settles.
Archismita Mukherjee
Insurance Content Analyst
