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Strategies for Success: How MGAs Can Thrive in the Indian Insurance Industry
Insurance InsurTech

Strategies for Success: How MGAs Can Thrive in the Indian Insurance Industry

By Rajarshi December 26, 2023 - 66 views

MGAs (Managing General Agents) are currently not existent in the Indian insurance industry. However, there is a genuine need for the introduction of more MGAs into the industry, considering the country’s overwhelming need to scale up insurance penetration (just 3.76% of the population had insurance coverage in any form in 2019).

MGAs will help the industry considerably by identifying niche markets and underserved segments and offering specialist solutions for the same on behalf of insurers. It will be possible to offer customised and more value-added micro insurance in India which is not possible for bigger insurance players across several regions.

Insurance MGAs can help in the extension of coverage throughout several under-served and rural areas, where traditional firms have limited presence due to the lack of resources and infrastructure. MGAs can also partner with local brokers and agents to offer more tailored insurance products that meet community-specific requirements with aplomb.

As mentioned, they can also cater to niche and often underserved (by bigger insurance carriers) segments like startups, HNIs (high-net-worth individuals), and SMEs (small and medium enterprises). Insurance MGAs can also enter into collaborations with insurtech players that are already leveraging technology to disrupt the industry. Through these partnerships, these startups can tap their distribution networks and expertise in claims management and underwriting.

MGAs Competitive Landscape and the Need for Proper Strategies

MGAs (Managing General Agents) do not exist in the Indian market today. However, they are steadily becoming more relevant worldwide and also throughout Asia. The IRDAI is already considering the feasibility of allowing MGAs in a bid to increase insurance penetration throughout the country and it may become a reality soon.

The traditional argument in favour of MGAs is usually based on the fact that global and large insurance carriers have become behemoths with commoditised and mass-market products and services, which do not focus on individual customer requirements. MGAs, in contrast, are smaller operations which can easily foray into niche areas and enable bespoke and more affordable insurance solutions tailored for their customers.

The sector may develop exponentially across Asia over the next 2-3 years. Hong Kong is anticipated to stay a more dynamic coverholder segment and more MGAs should come up in Singapore. More regulators in the region will steadily amend their frameworks and unveil pilots to allow MGAs into their insurance industries. The usage of MGAs is fast becoming a common strategy for distribution channels in insurance.

Along with potentially enabling microinsurance in India for specific communities, people, and regions, MGAs can also react more swiftly to new market changes and enable more efficient risk management on behalf of bigger insurance carriers.

Hence, considering the competitive nature of the market globally and with things heating up in Asia, MGAs will have to fine-tune their strategies for success in a more intelligent manner. For instance, as far as the Indian market is concerned, here are some strategies that they can consider.

Strategies Worth Considering for MGAs in India

These are some strategies that MGAs (Managing General Agents) can harness for more success in the Indian insurance industry.

  • Adopting a specialist approach for various niches is essential. For example, the fisheries industry is one where MGAs can be a breath of fresh air. India has close to 7,500 kilometres of coastlines and 3 lakh+ fishing vessels plying in the ocean. If inland waterways and other market players backing fishers are taken into account, then there is a massive market at hand. Yet, penetration of insurance has been low even for bigger and more organised players. MGAs can bring all entities under the umbrella of insurance while lowering costs at the same time. They can enable more personalised solutions for fisheries players along with better service and support.
  • Another instance can be crop insurance for smaller zones where any specific crop thrives. These may not have specialist or tailored insurance as per the needs of their farmers. MGAs can help underwrite these risks with a better understanding of this particular sector and area.
  • India could witness MGAs like their European and U.S. counterparts that offer solutions to both smaller and bigger companies. Some companies functioning in India may require specialist solutions to better service clients. This is another area that MGAs can tap as a part of their strategy.
  • MGAs can leverage technology to reach a wider audience of customers, tapping digital channels like websites, social media, and mobile apps for marketing and selling insurance products. This may help reduce the costs of distribution considerably while making insurance more accessible for everyone.
  • MGAs can also harness technology to improve underwriting through using machine learning, data analytics, and artificial intelligence. They can build a competitive advantage in evaluating risks and pricing policies better. They can enhance profitability and lower losses as a result.
  • In the same way, cutting-edge technologies can be leveraged by insurance MGAs for streamlining and handling claims management via automation and artificial intelligence. Claims can be processed seamlessly while lowering processing times and boosting customer satisfaction levels greatly.

As can be seen, the time is ripe for the introduction of MGAs (Managing General Agents) in the Indian insurance industry. MGAs that leverage technology can help cater to niche segments, offer more personalised or micro-level insurance solutions, boost underwriting and claims management, and combine with insurtech or fintech players to revolutionise the industry. The sector has huge potential for growth in India although a lot depends on official regulations being released for the same shortly.

FAQs

What are the key opportunities for MGAs in India’s expanding insurance market?

MGAs can tap several opportunities like the expansion of insurance coverage on behalf of larger carriers in under/un-served/rural markets, offering more niche and personalised insurance solutions with specialist services, making claims processing and management more seamless along with enhancing underwriting for insurance companies, and also offering insurance solutions for sectors usually not covered by traditional insurance firms.

What are some examples of successful MGAs in India?

There are no examples of successful MGAs in the country as of yet since it has yet to officially allow these entities in the insurance industry. However, the IRDAI is reportedly deliberating on the possibility of allowing them in the future.

What are the key trends that MGAs should watch out for in the Indian insurance market?

Some of the major trends that MGAs should watch out for in the Indian market include the focus on more specialist and micro insurance solutions, increasing customer demand for personalised insurance products and services, and of course, the increasing shift towards digitisation.

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