The rapid pace of change in the property and casualty insurance industry over the past few years continues to increase as industry consolidation dominates the U.S. insurance environment. For retail agents, that often raises the specter of dwindling insurance company markets and diminishing commission dollars. But one expert, an MGA and a member of the AAMGA, believes that retail agents have options.
"The clever retail agents all across the United States are developing 'niche' insurance products to fill the voids that currently exist in the insurance marketplace," says Andrew Barile, CPCU, president of the commercial division of Arrowhead General Insurance Agency, Inc., in San Diego, California. "Retail agents can 'partner' with MGAs to provide insurance products to new markets such as artisan contractors, stand-alone commercial auto or insurance agents' errors and omission coverage for nonstandard auto retail agents. Many new niche market opportunities for retail agents continue to evolve, particularly with the downsizing that's taking place in the property and casualty insurance industry."
According to Barile, as insurance carriers continue to specialize, they tend to disregard books of business that the retail agents should be able to bring into their agencies. "The retail agent, working with a professional managing general agent, can put together a very effective specialty niche insurance program for the books of business that have been discarded by many property/casualty companies," says Barile.
What can the professional MGA do for the retail agent? Barile says that MGAs can assist in the structure of a niche program by obtaining underwriting and rating information. "Managing general agents are familiar with independent rate filings or ISO deviations and can analyze schedule and experience rating information," he says. "At Arrowhead, for example, we make every effort to tailor-make our policy forms to provide the correct coverage for the niche market, whether it be tow truck operators, repossessers or any other homogenous class of business," says Barile.
The Arrowhead executive says that these days, MGAs are making a concerted effort to attract claims personnel who are sophisticated in specific niche markets so that they can help keep losses to a minimum. "Retail agents today are spending a great deal of time examining ways to control costs to be more competitive," says Barile. "But working with an experienced MGA can help retail agents control costs while giving them more time for prospecting and selling."
Barile also says that a professional MGA, with his/her many important insurance company connections, can offer the retail agent a wide assortment of insurance products and can do market searches to find the appropriate insurance company for a market program.
"Even more important for the retail agent," he says, "is the fact that MGAs have access to reinsurance markets. "At Arrowhead, we have more than 50 reinsurers visiting our offices throughout the year. Utilizing the market intelligence that reinsurers provide helps an MGA structure a cost-effective reinsurance program and assures the retail agent adequate capacity."
Barile maintains that the barriers that existed in the past between different types of producers are being erased. In the future, most MGAs will have access to both admitted and nonadmitted paper, he says. "Retail agents need to capitalize on this most important market access and flexibility. It is essential, therefore, that retail agents develop strong relationships with MGAs who are capable of performing all the functions of an insurance company. Those functions include marketing, underwriting, policy issuance, billing and collection, actuarial and claims."
The first step in developing a niche program, according to Barile, is to assess the potential--actually, to determine whether a niche program can be successful. "The professional MGA can help the retail agent in this regard," he says. "Questions such as 'What is the expected premium volume?', 'What is the average premium per insured in the niche program?' and 'How many insureds can fit into the niche classification?' should be asked."
Pricing the niche program properly is of paramount importance, says Barile. "Too often the retail agent does not have access to company rate and form filings. A professional MGA can be of enormous assistance in this regard," he says.
Barile maintains that independent agents need a managing general agent with the following characteristics:
* A proven track record of giving support to the independent agency system.
* A low-cost product provider.
* Access to many types of insurance carriers.
* Access to the reinsurance market.
* A demonstrated investment in technology, product development, and in building a marketing force. *