MGAs want a single process to assess insurer risks

Managing general agents (MGAs) view conduct risk as a business differentiator but want to see a single standard process to assess risks adopted by insurers and capacity providers, according to the latest MGA Matters survey from the Managing General Agents' Association (MGAA).

The association also found participants said a single process would provide clarity and avoid misinterpretation of what’s required.

The Survey of MGAA full members looked at the actions MGAs are taking and their focus to ensure their businesses are engaged in the conduct risk process.

More than 67 percent of the MGAs who responded to the survey said conduct risk is or may be a business differentiator; providing an opportunity to show they’re ‘ahead of the pack’. However, recognising a lack of consistency and understanding in the application of conduct risk, 58 percent are calling for a standardised assessment process to be used by insurers and capacity providers.

Respondents appreciate actions speak louder than words when it comes to the assessing, identifying and managing of conduct risk. More than 64 percent have talked to their insurers/capacity providers and high numbers are proactive in laying foundations for the process by undertaking product assessments (71 percent), distribution and supply-chain assessments (51 percent) and capacity provider/coverholder audits and follow-ups (45 percent). Over three-quarters (77 percent) have a nominated individual to handle complaints.

The emphasis on building a conduct risk culture throughout their businesses was further evidenced by the fact that only 22 percent of respondents have brought in an external provider to support the assessment process, said the MGAA.

The majority of MGAs’ shared a common view on the definition of conduct risk – nearly 84 percent describe it as ‘the risk that a firm’s behaviour will result in poor outcomes for customers’. However, respondents are less clear on its proposed impact on customers. While more than 45 percent agreed it will improve customer outcomes, over 48 percent are undecided and nearly 7 percent suggest it will not.

MGAs have experienced increased levels of engagement with their insurers and capacity providers, said the MGAA. Over 64 percent reported a general increase in scrutiny and 58 percent were assessed and asked specific questions on conduct risk. 51 percent saw increased levels of oversight on binders. Only 19 percent reported that their level of engagement has not increased.

MGA Matters is a research-based partnership between the MGAA and MGA start-up specialists Castel Underwriting Agencies. It was launched in 2014 to identify and raise awareness of the issues currently impacting the growth and success of UK MGAs.

Mark Birrell, chief executive officer of Castel, said: “The levels of activity and capacity provider engagement show that conduct risk is at the heart of the MGA business culture. However, MGAs don’t want to go it alone and recognise that without market-wide recognition of the need for an agreed process, there is the potential for mis-interpretation and inconsistency that could undermined the impact of their hard work.”

Peter Staddon, managing director of the MGAA, added: “This Survey illustrates that although MGAs are embracing conduct risk, there’s a pressing need for a standardised process, which our members are working hard to facilitate. We see a clear need for a unified approach, where the whole distribution chain agrees what’s needed and more importantly, agrees on the meanings of each component in the process.”