Digital MGAs and Direct-To-Consumer - a Reinsurer's Perspective
A growing number of carriers are taking advantage of digital channels to reach digital natives using digital managing general agents (MGAs). This report details a series of considerations that carriers must make to develop an effective approach to digital MGAs.
The biggest consideration when deciding between building a platform in-house or leveraging a traditional MGA contract with an InsurTech startup is distribution. Reinsurers like Munich Re are very invested in the InsurTech space and can vet various solutions or offer a second opinion on potential startup partners. For carriers that chose to build their own solution, reinsurers can help assess the mortality/morbidity impact of a new underwriting tool, application process, and target market.
The next consideration should be pricing. Going direct means new underwriting tools and processes and carriers have to think about how risk evaluation fits into all of that. Will the new target market likely result in better mortality/morbidity? Does the new application process mitigate the risk of anti-selection? Reinsurers can help share this risk. Munich Re, with our focus on mortality, morbidity, and lapse assumptions, can partner with carriers who can leverage this expertise to set their own retail rates and determine marketing allowances.
The report also explores challenges such as rule engines and underwriting processes that could positively impact consumer experiences. Intellectual property and brand control could also present challenges for carriers, reinsurers and any startups involved.
All things considered, the carrier and reinsurer stand to gain a lot from partnership innovation. The reinsurance community is eager to support direct-to-consumer opportunities and the mainstream reinsurers offer underwriting rules engines to enhance customer experience and lower acquisition costs. When executed with care a direct-to-consumer model can benefit the industry expanding insurability for new applicants, business opportunity for carriers, and encouraging technological innovation in life insurance is available to all.Contact the Author Phil Murphy, Second Vice President, Individual Reinsurance – Innovation Munich Re, US (Life)