The insurance industry faces unique challenges that can undermine growth opportunities. This is particularly so for Managing General Agents (MGAs) and Program Administrators (PAs), who face an ever-evolving regulatory environment, rising costs, and modern-day obstacles such as cybersecurity risks and the rising number of socially inflated verdicts.
It is crucial for all carriers to continually identify key challenges and, more importantly, how to overcome them, but for MGAs and PAs, now is a time to be particularly diligent. As a trusted claims and risk management partner, Gallagher Bassett (GB) is constantly assessing the current landscape to pinpoint pressing problems. Below we discuss four of the most common claims challenges currently facing MGAs and PAs and how to address them.
Increasing severity and complexity of claims
One does not need to look far to see the toll socially inflated verdicts are having on carriers. The highly respected Swiss Re Institute says social inflation has become the main growth driver of liability claims, with large court verdicts causing claims in the US to soar by 57% during the past decade. Elsewhere, it has been reported there were 18 socially inflated verdicts of $10 million or more in the US in 2010. In 2023, that number skyrocketed to 58 and 2024 is “on pace to equal or surpass” that figure.
In the words of Jerome Jean Haegli, Swiss Re Institute’s Global Chief Economist: “Unlike economic inflation, there is no sign of social inflation abating.”
The strategic solution for an MGA or PA is to partner with external experts who can provide a full scope of services. It is not recommended to have generalists handle high-complexity risks, which is what sets apart GB’s ability to provide a swift, tailored response backed by best-in-class technology and operating models. Other ways to tackle increasing claims complexity include benchmarking results with industry best practices — avoid the temptation to think a good loss ratio will be maintained in the long term without active and improved management — and considering the value of independent consultation to ensure your claims management process is delivering the best results.
Accessing top talent exactly when you need it
MGA and PA competition for talent is fierce, and staff absences due to illness or vacations can take a devastating toll on smaller claims departments. As an MGA builds out its portfolio, access to quality claims management experts with deep technical expertise and flexible staffing to match the ebbs and flows of the business is critical.
That is easier said than done, which is why it is beneficial to have a partner who is well-versed in nurturing claims management professionals and, furthermore, looks to recruit staff with transferable skills, invests in superior onboarding and training programs, and enables flexible working arrangements built on trust.
Keeping pace with technological advancements
Emerging technologies have made life better for MGAs and PAs, but the downside is the challenge of keeping up with the fast-paced evolution of these often-costly systems and solutions. This is frequently exacerbated by an enhanced regulatory environment that requires such technology to not only integrate but also be flexible and customizable. A best-in-class RMIS system that reviews the operational performance and outcomes of claims management is essential. However, many MGAs and PAs cannot afford to create a quality system or do not have the ongoing funds needed to maintain pace with technological developments.
Outsourcing to a partner allows them to avoid such costs while still gaining access to superior systems and platforms. Start the conversation by ensuring the partner offers an industry-leading RMIS platform and has the analytics capabilities to turn data insights into quality business decisions. Better still, create a specific set of KPIs that inform the industry best practices needed to achieve them. GB’s award-winning Luminos is an example of a RMIS platform that offers cutting-edge benchmarking capabilities, along with our suite of proprietary claims management decision tools.
Ensuring quality IT and data security
Regardless of industry, attempted data breaches and ransomware attacks are now the norm rather than the exception. The risk for MGAs and PAs is that they are charged with not only protecting their own data but their clients’ data, which means the impact of a breach can be devastating for both their balance sheet and reputation.
To mitigate cyber risks, MGAs and PAs have an ironclad commitment to implementing robust IT security controls. This includes having clear operational guidelines and a protocol to follow if an attack materializes. It also extends to having total confidence that your claims risk management partner is equally committed to protecting the sanctity of both your information and that of your clients. It is also highly recommended that MGAs and PAs invest in cyber insurance.
GB has a proud history of helping PAs and MGAs navigate the complex world of claims management and stay ahead of the competition. To find out how GB can support you to deliver better risk management and claims outcomes, reach out to Jon Stambaugh, SVP — Carrier Practice, or book a free consultation with a GB expert here.
Jon and members of the dedicated GB Carrier Practice team will also be attending Target Markets’ 24th Annual Summit on October 21–23. Click here to register to join them in Scottsdale, AZ, to discuss these challenges, our solutions and more.
