The hidden opportunity in insurance for data startups: what is an MGA?

Climate change. Geopolitics. Artificial intelligence. The world is changing at lightspeed and the risk landscape is changing with it. 

Insurers are increasingly turning to big data to help them navigate these rapidly shifting global challenges. They’re hungry for access to the reams of real-time data being produced across industries today – from sensors on ship engines to cameras on construction sites and beyond. Exactly the kind of data being collected and analysed by startups to build innovative products and solutions. 

This is creating a huge – and often unseen – opportunity in the insurance industry for all kinds of entrepreneurs: to use their expertise and technology to become specialised insurance intermediaries known as Managing General Agents or MGAs, with help from Howden Ventures.

From the size of the market to the benefits for startups, read on to learn everything about MGAs. 

What exactly is an MGA?

MGAs are a special type of insurance intermediary with more authority than usual to quote and bind policies and develop insurance products. 

They are often also distinguished by having deep expertise in speciality or niche sectors, creating tailored insurance policies for their clients.

MGAs are growing in popularity because of their versatility as a business model, and their ability to introduce new products and product modifications in a fraction of the time of traditional markets.

How big is the MGA market?

The US MGA market, the biggest in the world, more than doubled in size in two years. 

Between 2020—2022, it grew from $15bn of premium underwritten by MGAs not affiliated with insurance companies to almost $33bn.

Why do insurers want to work with MGAs?

There’s growing interest among insurers in partnering with MGAs to leverage the specialised knowledge and skills they bring to the table.

MGAs’ expertise in niche areas offers clients deep, unique and specialised solutions to needs that may be challenging for larger insurers to address. 

Insurers also want access to technology expertise and digital tools, which historically haven’t played a major role in the sector – particularly in automation, pricing, risk assessment and analytics.

What’s more, integrating MGA technology enhances operational efficiency for insurance companies. 

So, what’s the opportunity for startups?

In recent years, MGAs have been collaborating with insurtech start-ups, combining specialist knowledge with tech infrastructure to develop innovative new approaches. 

Howden Ventures is accelerating this groundbreaking trend by helping tech startups with exciting applications to become MGAs themselves.

What are the benefits of being an MGA?

How does growth that outperforms the stock market sound? 

By becoming MGAs, startups can focus on delivering quality products to niche clients, in niche territories, without concerns about solvency. 

That’s why this model has a track record of delivering consistent growth of earnings, frequently outperforming both the stock market and the traditional balance sheet. 

If being an MGA is so great, why isn’t every startup doing it?    

Regulatory compliance, underwriting expertise, capital requirements, risk management, distribution channels – all of these can make it challenging for start-ups to become MGAs on their own. 

The good news is Howden Ventures exists to help tech startups with exciting applications to become MGAs.

Does my startup have to stop doing everything else and just be an MGA?

No – lots of startups add the MGA business model as a pillar of their business and provide these services alongside their core offer.

What kinds of startups can get involved?

Any data-driven and technology-driven company able to produce or interpret data in new ways, which can be used by the insurance industry to better understand and price risks. 

Startups with good ideas that don’t yet have the technology fully developed can be given support to build via the Howden Ventures platform. 

Where does Howden Ventures come in?

Howden Ventures is an investment and risk incubator that acts as a bridge between innovative start-ups and the insurance industry.

They invest in startups that they believe can bring valuable solutions to emerging risks – with the aim of fast-tracking insurance product development. 

By working with Howden Ventures, new businesses get seed funding investment alongside underwriting capacity, operations and governance and so much more – all the necessary resources to enable the transition from an early-stage startup to a successful MGA.