Change is rife in the insurance industry, as it struggles to get to grips with geopolitical and economic challenges and reflect the evolving risk environment in its pricing strategies. 

The sheer size of the challenge is difficult to overstate. Flooding in South Africa, in 2022, was responsible for ZAR 30 billion in damages, and more losses are likely, as the Notre Dame Global Adaptation Initiative index rated South Africa as highly vulnerable to climate change.

Growing competition 

Although rising premiums can do some of the heavy lifting as the industry accounts for greater losses, this comes at the cost of customer loyalty. Businesses across the country, also facing challenging circumstances, will look to reduce coverage or switch providers if they feel they are getting a raw deal.

It is in this context that Managing General Agents (MGAs) face growing competition from challengers and insurtechs. Many distributors are looking to some of the most disruptive trends in insurance to secure a competitive advantage, revolutionise their service offering and build stronger customer relationships. They are harnessing the power of Artificial Intelligence (AI) to better understand both their customers and the risks they face.

Leveraging AI

However, MGAs are well placed within the insurance industry to ride this wave of disruption, by leveraging the advantages of AI and combining them with the deep, granular understanding of their customers that a network of local underwriters can provide.

There are some obvious benefits from AI that MGAs should be looking to implement quickly. It can immediately help streamline distribution processes by automating tasks, giving underwriters and experts more space to make value-added decisions. Moreover, inquiries from potential customers can be handled automatically by AI, while its data analysis functions can be used to target the most profitable inquiries and create quotes quickly.

AI can also deliver efficiencies for customers, making it easier to access flexible products, as customisation does not necessarily rely on assessment by human underwriters. Because firms can use their resources more effectively to provide oversight of these processes, using AI in this way allows insurers and MGAs to expedite customers’ claims, as assessments can be completed automatically.

The technology can also be used to predict the probability and likely severity of a loss event, ensuring that customers can receive highly individualised, specialist cover. MGAs’ ability to offer highly targeted coverage will depend on their ability to leverage AI’s data collection and analysis capabilities, which can enable them to better understand their customer base and the level of risk that it’s facing. Used properly, the technology would be a powerful combination with local underwriters’ expertise and contacts.

The MGA space is constantly evolving

As systems read real-time data on customer behaviour and the risk environment, they can either raise rates to ensure better protection or drop them in response to falling risk. This will be a critical advantage for firms offering cover in sectors like cyber, where behaviour has a significant influence on how likely a significant loss is.

In sectors like agriculture and forestry, understanding past weather patterns, as well as mapping high-risk areas, will be critical to improving climate resilience, reducing insured losses, and keeping premiums competitive. Firms that can quickly and efficiently implement AI systems to collect, analyse and then use this data will be at a distinct advantage.

Within an insurance sector that is rapidly changing, the MGA space is constantly evolving, driven by growing customer expectations and technological innovation. 

Those who can adapt to these trends can succeed in an increasingly competitive landscape. Those who do not are at risk of being overtaken by the disruptors who embrace all the advantages that AI can bring to bear.

You can read the original article on the FA News website