Insurers Seeking MGA Brand On Products

Insurers are increasingly looking for wholesalers and managing general agents to put their brands on carrier products in order to reach a wide retail production network at low cost, one MGA executive contends.

“We are one of the leading ways to saturate the marketplace,” said Euclid Black, president of Black/White Associates in Henderson, Nev.

“If you're a small [insurance] company with $50-to-$100 million in surplus but well-rated, and you want to enter the market, the MGA marketplace is absolutely the way to go,” said Mr. Black, who is also president-elect of the American Association of Managing General Agents, based in King of Prussia, Pa.

Mr. Black and other AAMGA executives spoke to reporters at a press briefing here during the group's recent 81st annual conference.

Mr. Black noted that he had been approached recently by an insurer with a new personal lines product because the company wanted to reach the 2,500 producers his firm has under contract–even though Black/White is not in the personal lines business. “They want to put our brand on their product so that they reduce sales resistance and frictional costs,” he said.

He added that some big multiline standard carriers “have the wrong distribution system” to deliver new and innovative types of personal lines protection.

Their producer plants, consisting of big commercial brokers, don't want to write personal lines, he said, explaining that these carriers really need relationships with producers that have annual revenues of $3-to-$5 million.

“They can't reach those people. We can and we do,” he said.

In agreement was Scott Anderson, AAMGA's immediate past-president, who is also president of Concorde General Agency in Fargo, N.D. An MGA's “existing relationships are really a competitive advantage” in these situations, he said.

The executives also highlighted the advantages of delivering a personal touch in a high-tech world.

“We've been going out with underwriters and senior people to visit agents who have not seen a person or talked to somebody in a long, long time,” said AAMGA President Thomas Albrecht, noting that many retail agents are regularly dealing with contacts via e-mail and voice-mail.

“You can take a piece of business or two by just sitting there” in an agent's office, he said, adding that he picked up a $115,000 account in just that way a week earlier.

“It's still a relationship business, and we can't lose sight of that no matter how good we get from a technology standpoint,” said Mr. Albrecht, who is also president of Barclay/SIU Agency in Montgomery, Ala.

Mr. Black said many standard companies have done away with middle-market underwriting, replacing it with online tools that deliver a single number as a price. “There's no appeal [process]. Is this the right number? Is this the wrong number?”

“That producer is stuck,” he said, noting that there's no explanation provided of proprietary forms, either. In contrast, he said that when retailers do business with his firm, they interact with people who have seniority in the business.

He also contrasted the face-to-face MGA approach with “slick” online advertisements touting “the hottest products in the world.”

“You've got to ask, 'Who are these people? How do I know they're legitimate? How do I know they're going to pay their bills? How do I know anything?'”

“Arguably, the more of that [type of advertising] there is, the more value there is a proven franchise,” he added.

Mr. Anderson noted, however, that members of AAMGA need to do some re-branding so agents have a better understanding of everything that MGAs and wholesalers can help them with.

“We've done personal lines for all of our 25 years. We've done standard commercial lines,” he said, noting that agents he's known for decades still weren't aware of it.

“A lot of agents look at us as a market of last resort…because that's how we've presented ourselves for eternity….We've [said], 'If you need something you can't get done somewhere else, we're the guys. Come find us.' We haven't said, 'We can be there for your motorcycle or Mom & Pop seamstress shop just like the standard market.'”

Mr. Anderson noted, however, that retailer awareness of these capabilities is increasing, explaining that his firm has marketers out on the road to increase their understanding. “It's a daily job,” he said.

MGA executives recognize that another potential roadblock to future success for E&S market participants may come from optional federal charter legislation, which could level the playing field between the national insurers it would create and surplus lines carriers.

“Some people say OFC will be here. It's not a question of if, but when,” Mr. Anderson said, noting that during his presidential term he began an initiative known as Project 2017, aimed at studying potential future scenarios and developing a better understanding of what the distribution system might look like in 10 years.

By starting this forward-thinking initiative, which Mr. Albrecht intends to carry forward, the association will evaluate “trends or tendencies out there that we can follow on and monopolize on,” according to Mr. Anderson.