The Evolution of Insurtech MGAs in Today’s Insurance Landscape

Insights from the 'Insurtech MGAs: At the Forefront of Innovation,' Research Report by ReSource Pro and Insurtech NY, in partnership with INSTANDA

The insurance sector has undergone a seismic shift over the last decade, driven by innovation, technology, and an evolving understanding of market needs. Among the notable players reshaping the landscape, Insurtech Managing General Agents (MGAs) have emerged as disruptors, driving growth and innovation across the industry. These insights are underscored by findings from the recently released research report by ReSource Pro and Insurtech NY, in partnership with INSTANDA.

Here’s what we learned from the research and why MGAs are at the forefront of reimagining insurance as we know it.

Insurtech MGAs as Drivers of Change

Among the many insurtech entrants in the North American market over the past decade, few categories have been as impactful or innovative as the startup MGA space. These entities operate across nearly every business line. They are creating new opportunities in traditionally underserved markets. At the same time, they are empowering the insurance sector with advanced technology and flexible business practices.

As we know from our own experience of working with MGAs, they combine deep expertise in niche markets with innovative technology. Today’s MGAs are not just intermediaries; they design and distribute bespoke products while offering streamlined processes through automation, analytics, and digital-native strategies.

Innovation comes in many forms, from embedded and parametric insurance products to on-demand risk solutions, paving the way for MGAs to meet emerging customer needs. This adaptability is essential as insurers, brokers, and agents seek new partnerships to target specific segments effectively.

Download 'Insurtech MGAs: At the Forefront of Innovation' Report

Building Business Models that Thrive

Interestingly, the report notes that 80% of startup MGAs develop their own products, while nearly one-fifth take on risk, allowing them greater control over product design and distribution. Such autonomy empowers MGAs to serve niche markets with tailored insurance products while also navigating the complexities of risk management—a balancing act that demands deft underwriting and strategic use of reinsurance.

The report spotlights how MGAs leverage expertise within specific domains, often born from founders with extensive experience—either in the insurance industry or a completely different vertical. Driven by this deep understanding, MGAs are creating uniquely tailored insurance solutions aimed at addressing real-world challenges specific to their target markets.

For instance, some digital-native MGAs achieve profitability by focusing on thin-margin, commoditized products, while others concentrate on mono-lines like pet or flood insurance to establish themselves before expanding further. Another noteworthy segment adopts parametric models, where payouts are triggered by specific events, such as weather disasters. By delivering fast and transparent claims outcomes, these approaches address longstanding pain points in the industry.

Technology’s Role in the MGA Evolution

Startup MGAs are rapidly adopting technology to enhance distribution and scale their operations. Whether they choose custom-built solutions or work with vendors, they are investing heavily in technology to differentiate themselves and thrive in competitive markets.

This choice reflects the distinctiveness and specialization required within the MGA space, as the nature of their business often involves non-standard, complex products tailored to unique markets. Perhaps unsurprisingly, nearly half (47%) of MGAs collaborate with technology vendors (like INSTANDA) for their policy administration system (PAS) needs.

Adaptable, purpose-built solutions that support faster market entry, flexible configurations, seamless integrations with third-party tools, and improved customer engagement are the order of the day.

Transforming Distribution Strategies

Distribution channels for MGAs are as diverse as their product offerings. While retail agents play a dominant role, over half of MGAs adopt direct-to-consumer strategies in tandem with traditional approaches. Partnerships with wholesalers have also been instrumental, boosting geographic reach while opening doors to more capacity providers.

Embedded insurance remains an attractive model for many MGAs, as they aim to embed their offerings within partner ecosystems, from e-commerce websites to travel platforms. Almost one in five insurtech MGAs has adopted embedded insurance as a primary strategy, charting a path for the industry to deliver consumer-first insurance.

Still, distribution remains a significant challenge. Reaching niche markets where customers are unaware of specialized insurance needs and maintaining a steady stream of applications can impact growth potential. As the report summarizes, success requires a flawless balance between distribution efficiency and market education.

The Role of Claims Management in Elevating Customer Experiences

A surprising finding from the report highlighted that almost 40% of insurtech MGAs now manage claims internally. Historically, claims handling was left to carriers, but MGAs are increasingly bringing it in-house to establish themselves as full-service partners.

By leveraging their expertise, MGAs improve the claims process with quicker resolution times and tailored customer support. This shift enhances the value MGAs provide to carriers and agents while ensuring policyholders receive a positive experience.

Redefining Capital and Capacity Relationships

Startup MGAs rely heavily on capacity providers, a reality that highlights the importance of building strong relationships with insurers or reinsurers. For many MGAs, a single carrier or reinsurance relationship underpins their entire operation, highlighting a potential vulnerability if capacity is withdrawn.

Despite this reliance, the research paper highlights that most respondents reported healthy loss ratios, and only 7% had high burn rates, reflecting sustainable practices and disciplined operations.

Growth remains a key focus area for MGAs, with a clear target to reach $5 million in gross written premiums within two years, and $10 million shortly thereafter. As the report surmises, scale matters—not just for profitability but to attract and sustain capacity providers.

A Look Ahead

ReSource Pro and Insurtech NY’s research reveals that while MGAs continue to face challenges like capital constraints and distribution hurdles, their ability to pivot and adapt is unmatched.

As we head into 2025, the MGA space is rich with promise and opportunity. Its innovation in addressing underserved markets, leveraging advanced technologies, and improving distribution efficiency is having a positive impact right across the industry.

At INSTANDA, we are proud to support this incredible community of progressive MGAs in rapidly bringing their unique products to market.

Interested in learning more about how technology can help your MGA thrive? Speak to us today and see how we’re enabling the next wave of insurance innovation.