Technology

A unique value proposition

Virtual MGA helps MGAs distribute their programs electronically

By Nancy Doucette

As consumers, we’ve settled into a “self-service” mentality. We’re comfortable getting cash from ATMs, pumping our own gas (unless we’re traveling in New Jersey or Oregon where gas stations mandate that attendants pump the gas for us), and scanning our own purchases at the grocery. Shopping online has become a matter of course and capitalizes on our willingness to serve ourselves.

Growing numbers of retail agents can complete billing, policy and claims inquiries; obtain quotes; and order endorsements from their standard markets via the Internet. However, when dealing with their MGA partners, retail agents haven’t had many self-service capabilities available to them.

That fact was not lost on Jake Hampton. An industry veteran with experience in all facets of the insurance transaction—including the London market—Hampton sought to fill that void. In 2007 he launched Virtual MGA, a Web-based trading platform that he developed to facilitate transactions between an MGA and a retail agent.

“The insurance industry is huge,” Hampton observes. “To think that you’re going to be able to solve the problems of the industry is naive at best. So Virtual MGA focuses on programs—niches within property and liability classes—where an MGA has a tailored solution for a particular SIC code or class of business.”

Instant gratification for retailers

John Griffin is president of South Texas General Insurance Agency (STGIA) which works with some 2,000 retail agents in Texas. Based in Houston, STGIA specializes in dwelling fire, homeowners, and mobile homeowners coverages. Griffin says he was looking for a way to enable his retail agents to get quotes from his agency via the Internet and if the risk fit the parameters, get a binder and complete the transaction online. Virtual MGA could help him do just that and he went live with them in early 2008.

He says he is now able to provide his retailers with “instant gratification,” which they appreciate. “Our retailers say they like the speed, accuracy and convenience that they get using this system,” Griffin notes.

From a management perspective, Griffin has been able to do more business while maintaining his staff level. “Our service staff spends a lot of their time giving quotes,” he points out. “To have the production level that we do, we’d need more customer service people if we didn’t have Virtual MGA on our Web site. Giving agents the ability to get the quotes online means we can handle more business without increasing staff size.”

Hampton says, “You definitely have to automate homeowners; otherwise, you’ll get buried by the business. Virtual MGA automates that process so that the retailer can self-service a lot of the transaction on the front end and the MGA can focus on higher value parts—those ‘request to binds’ rather than rating something that could be an exercise in futility.”

During the set-up phase, Griffin provided Virtual MGA with the rating algorithms and all the rates, underwriting rules, and policy wording. What he got in exchange was a button at the STGIA Web site that links retailers who have a password and login to the Virtual MGA platform.

While the new workflow has been well received by STGIA’s staff, Griffin admits there’s been hesitation on the part of some of the agents to embrace online transactions. “A number of our small rural agents are more comfortable just picking up the phone and giving us the information,” he says.

Griffin predicts that in the not too distant future he will encourage retail agents to use the STGIA Web site by tiering commissions. “Let’s say the maximum commission is 15%. If the agent doesn’t use the Web site, he may get only 12.5%,” he explains.

Better hit ratios

Hampton notes that Virtual MGA doesn’t provide consulting services per se to MGAs, but they do coach their clients on the best practices which have resulted in successful implementations for other shops. He acknowledges that some MGAs are tempted to simply take manual processes and put them online, for example, putting an ACORD form up at the Web site for agents to fill out.

“We help our clients arrange information so that it’s the most user-friendly,” Hampton explains. “The ‘kill questions’ are the first things that the retailer sees. They’re the eligibility questions. Certain answers will knock the deal out of the box—more than three claims in the last three years, asbestos exposure—we bring those questions up front.”

He explains that Virtual MGA’s “intelligent interview” process uses drop-down menus to reveal additional underwriting questions when needed.

“The retailer wants to know: ‘Are you a market or not?’ They don’t want to wait until page 10 of the quote form, after they’ve filled out all that other info, to come across that one question that disqualifies the deal,” he notes.

Hampton says this approach actually increases the MGA’s hit ratio. “The typical hit ratio for most MGAs is 20% to 25%,” he observes. By positioning the “kill questions” early in the rating process, he says Virtual MGA users see better results. “We track conversion ratios for our clients,” he says. “We expect our clients to have an 85% conversion ratio.

“If it’s less than that,” he explains, “we recommend that the MGA tighten up their underwriting rules to filter out those risks that don’t qualify.”

Virtual MGA assembles the content an MGA provides for each of its programs and configures it on the Virtual MGA platform. “This approach works only if you’re going after niche-type program business,” Hampton says. “We’re focused on the niches where an MGA needs the whole transaction consummated.

“All an MGA and his retailers need is an Internet connection, Internet Explorer or Firefox, or they can go through Google,” he adds. “They don’t have to buy any hardware or software. We host everything. All they have to do is maintain an Internet connection.”

Being a hosted solution, Virtual MGA does have a disaster recovery component to its offering, but Hampton emphasizes, “We’re not in the disaster recovery business.” That said, Virtual MGA offers MGAs hurricane shutdown capability. Hampton recalls when Hurricane Ike was bearing down on Texas in 2008. One of his clients that writes on the Texas coast was able to suspend writing new business in Tier 1 until the storm had passed.

Before using Virtual MGA, that client would have had to shut everything down, Hampton points out. But thanks to Virtual MGA, he says the client was able to continue writing business outside Tier 1. “If you’re writing the whole state of Texas, you’re not worried about Dallas if there’s a hurricane off the coast of Galveston,” he comments. “As long as your people are safe, they can still be productive, they can still help clients. All their data is safe and secure in our data center.”

No more “Oops”

Gresham & Associates, Inc., headquartered just outside Atlanta, boasts nine locations and some $160 million in premium volume which it spreads among a dozen of the industry’s top MGA companies. About $15 million in premium is in Gresham’s Lloyd’s portfolio, according to Jackie Marler, director of underwriting for the firm. She oversees all Gresham’s binding contracts countrywide.

She says that Gresham went live with Virtual MGA in early 2009 and is using it internally, rather than making it available to retail agents, for its London-based property program. “We do a lot of wind coverage in Florida, Louisiana and Alabama,” she says. “So there’s a lot of aggregate reporting that has to be done.”

Prior to signing on with Virtual MGA, Gresham used a “homegrown system,” Marler says. “When you’re dealing with London, you have a lot of bordereaux, underwriting, and reporting requirements to get to them. We outgrew our in-house system and wanted to become fully paperless.”

Virtual MGA’s Hampton points out that “for programs with larger property exposures, managing the aggregates is extraordinarily labor intensive. Our aggregate tracking and contract management tool is a sophisticated application that halts the rating process when an MGA is approaching capacity for a particular area.”

Marler knows just how easy it can be to overwrite one’s aggregate. “We write from the coast of South Carolina all the way around to the Louisiana/Texas border,” she explains. “Our London broker gives us certain limits that we can write in certain zones, counties and states. So any time a risk is written, it has to be recorded.”

The internal system that Gresham used prior to switching to Virtual MGA was housed on the Gresham intranet site. “We used Crystal Reports and Excel but there were no ‘stops’ that we could set,” Marler recalls.

She explains overwriting aggregates was a particular concern in Florida where Gresham has three offices that overlap each other. She says the Jacksonville office could look at the Excel report and determine they had plenty of room to be writing in Orange County while the Orlando office might be doing to same thing. “Before you knew it, we would exceed our aggregate,” she says.

“Now when underwriters go into Virtual MGA and try to put in a risk, if they’re near capacity in that zone or county, it will stop them. We can then go to another market for the risks that aren’t eligible due to capacity issues.

“With Virtual MGA being an online system, all our people are on the same system, they’re looking at the same rates, the same policy forms. There’s consistency.”

Marler says when Gresham provided its data to Virtual MGA during the set-up phase, they sent along the bordereaux that they receive from London. She estimates it has 50 columns of data. Virtual MGA has to be able to retrieve that information—ZIP code, construction, distance from water, the TRIA premium—for each policy, based on what the underwriters put into the system.

Hampton notes, “We do a lot of London business. Over 50% of the business that flows across our platform is going back to London.”

Now that Gresham is totally paperless, and most transactions are managed in Virtual MGA, Marler says they’re more efficient than they were a year ago. “We’re not a single-entry system,” she says, “ but we’re getting a lot closer.”

Jake Hampton summarizes by saying that Virtual MGA’s unique value proposition is that it can manage the entire transaction. “Look at everything we can do—rate, quote, bind, policy issuance and then the bordereaux back out. In Texas we have the ability to do surplus lines filings. It all depends on what the MGA wants.

“We’re all about productivity—helping our partners write more business with their trading partners. And while we don’t see ourselves as a technology company—we focus on increasing business production for our clients—technology happens to be the main tool we use to help us do that.”

For more information:
Virtual MGA LLC
Web site: www.virtualmga.com