Talking AI, Investment and More at The MGAA Regional Conference

Insurance Edge caught up with Mike Keating, CEO at the MGAA at their Regional Broker Exchange Conference in Leeds recently. How is the MGA adapting to new trends and market demands, is new investment still coming in? All this and more, exciting times are ahead.

IE; The  MGA sector is really booming at the moment, isn’t it, Mike?

MK; Yeah it’s really about growth and innovation right now. Both in the UK and Ireland. Plus, internationally there’ll be some exciting announcements about Europe in the next four weeks as well.

I think in Europe the MGA sector has grown 23% year on year. Plus the US has actually matched that, if not exceeded that figure. Our members here in the UK are now generating in excess of 18 billion pounds of premium income.

So it is very buoyant. I think it’s underpinned by excellent underwriting expertise, agility, speed to market plus forensic knowledge of your distribution and the customer needs, You need that energy and the ability to pivot, quickly address challenges, but more importantly grasp opportunities, which is something this sector is famous for.

IE; There’s been lots of PE and VC investment recently too hasn’t there?

I was talking to someone earlier and it is recognized that MGAs are truly international now. This is a permanent fixture of the insurance chain. And we will continue to grow, the MGA sector in the UK will continue to attract investment.

It will attract capital, both traditional and new capital and I’m confident that MGAs will continue to demonstrate their value, their expert knowledge too. MGA sector foundations are built on excellent underwriting expertise, product knowledge and new product innovation.

IE; I’ve read online in a few reports that claims is a bit of a roadblock for some MGAs. Do you think that AI in particular is going solve a lot of those issues?

Yes, but It won’t be the panacea. There’s a lot of myths around AI but I think when AI is used correctly it delivers operational efficiencies, increases automation and reduces duplication. And I think that it’s got a great part to play in terms of customer benefit.

The challenge with AI generally and where there’s been some Achilles heels, (and I mentioned this on a recent podcast, ) is where there’s not been enough planning as in exactly what you want the AI to do. You need to plan carefully for your business, establish where it is now and how it goes forward, before a check’s been written on a new AI system.

IE; Yeah. I think in some ways the insurance sector is where we were say 25 years ago with internet retailing; Business people are all in their speedboats, racing into the ocean, but they don’t exactly know where the destination is.

That’s a good analogy. I used one earlier, which I borrowed off Chris Lee Smith from Accelerant who I thought framed it perfectly, when he said it’s like training a young puppy. If you don’t train AI, then it’s going do all sort of things.

IE; Would you say one key application of AI in the real world is verifying people’s ID during Claims processing?

Yes it’s verifying the data at FNOL stage and that has an impact in real time. On pricing too, all the way back to the underwriters. But the interesting way AI can impact on claims is the balance between automation and the human angle.

Maybe the human touch is less important for the younger generation, but if you take someone maybe from age 35 and upwards and they have a claim they still want the reassurance of speaking to somebody. Certainly when you get some older generations, silver surfers, or vulnerable customers, you cannot replace reassurance for someone who’s had a unfortunate event. They want to speak to another real person, who understands the impact of what’s happened.

So, AI will have a fantastic part to play on Claims, but I believe it’ll always be complimentary. I don’t see it ever replacing real human empathy, which is needed all the way through Claims, not just at FNOL stage.

So far AI has been deployed at the front end in terms of data enrichment, and it’s a good system; data ingestion, insights, plus risk appetite, almost forensic on pricing. But I’m not convinced that that same investment has been done in the operational area, across the whole sector. And when I say operations, that that’s both claims in the main, but also service delivery.

That is something I’m quite passionate about, we have our claims conference in November and more needs to be done.

IE; Do you see more regulation on the use of AI, both on how it’s being developed and deployed?

I think, the sector needs to be aware that the regulator has got a very close eye on it. You know, the regulator is all about good customer outcomes as we know, and good customer outcomes in particular with claims. So if it’s not right, then we’re in trouble.

Now we have seen a lot of VC money going in recently, which is great. If you went back 10 years and you looked at, InsureTech type MGA investment then the PE company was excited by the innovation itself, it was all about the tech.

Okay. Fast forward and I’ve asked the same organizations, why are you investing? Now, the tech now doesn’t get on the podium. It’s about the underwriting team, the underwriting expertise, the niche in terms of why they’re doing it in their, their distribution chain etc.

So the tech has become a hygiene factor, an enabler, but it’s not what it used to be in terms of the tech’s gonna be everything, the game-changer. Let’s be honest, there’s been a lot of failed in InsureTech MGAs because the platform has been absolutely fantastic, but there’s never been any customers because they haven’t focused enough on customer outcomes.

So we look at the people and the underwriting team. They’re the number one on the podium.

IE; Does a legacy-free clean slate give an MGA an advantage?

Firstly, Tech is no substitute for expertise. Look at say, Smartphones 15 years ago. The phone itself was exciting. Now it’s exciting as to what you can do with the device, the camera, the apps, channels etc. The smartphones today all do pretty much the same things, if you have learned the skills.

In direct answer your question, it will always be a competitive advantage if an MGA doesn’t have any legacy data systems, which some competitors might have. But it’s never going to replace underwriting expertise, distribution and product knowledge. That’s the key.

So when you come as a new MGA and you say, we’re gonna cover this particular specialty, X, Y, Z, you actually need that core knowledge. In depth knowledge, plus all those contacts. Otherwise, no matter how fabulous your portal is, you’re probably not doing much business.

When an MGA approaches an investor, they’re saying, “I can make money in this product. You lend me your balance sheet, I will give you consistent underwriting terms, core knowledge and expertise. We will make money.”

So those conversations don’t actually rely on legacy – or lack of it – at that point. And then the tech will be seen as a hygiene factor to deliver the data and everything else, which is important, certainly to the capital.

IE; Mike thank you for your time.