An Inside View of Insurtech Distribution Models


Since its early days, insurtech has centered around innovative distribution, automation, and technology. Each of the industry’s distribution models has its pros and cons, with the Managing General Agent, or MGA, model often offering the best of all worlds.

Each distribution model offers its own particular value depending on the need for coverage and circumstances :

  • Full-stack carriers: These fully licensed insurance companies control underwriting, profitability, risk and losses,and have the ability to customize programs and policies due to their size and scope.. They can also choose to use brokers and MGAs to manage their customer base. Full-stack carriers bear the greatest capital burden and regulatory challenges of the three models, and responsibility for losses can be costly depending on exposure.
  • Brokers: The easiest model to initiate due to reduced capital requirements, brokers serve as the conduit between insurers and customers. They have relationships with multiple carriers and are thereby licensed to sell a variety of products and while helpingcustomers to find the best option for their needs. The broker model often hasthe greatest distribution capacity and the lowest loss exposure risk, but brokers have the least control of themodels and receive the lowest share of theprofits.
  • MGAs (Managing General Agents): These specialized brokers serve as an all-weather distribution channel that is valuable in a variety of market conditions. With less overhead and fewer regulatory barriers, MGAs are able to innovate and adapt quickly to meet changing needs. They can also handle several functions that typically would fall under the control of afull stack insurer. Further, they retain a portion of the risk that they underwrite, leading to an increase in MGA-owned reinsurance captives and alignment of interests between the two.

At the intersection of full-stack and brokers, MGAs typically offer the best of both worlds-their success rests on the trifecta of talent, technology and capital. Just a few of the reasons we’re proud to call them our Members and partners.