MGAs try to better relations with underwriters

(May 2007) Worldsource Insurance Network, one of the country’s largest MGAs, has hired recognized underwriting veteran Leo Penney as a consultant. Penney’s role is to help Worldsource advisors package proposals to insurers on particularly complex and large cases. The arrangement is not a common practice, the company says, but it has become necessary to respond to a growing disconnect between independent insurance advisors and insurance company underwriters.

WIN is a subsidiary of Worldsource Wealth Management. Its managing director, Paul Brown, who is also the CEO of Worldsource Financial Management, says industry consolidation and more conservative underwriting risk assessments have led to a growing apprehension between independent agents and the underwriters of their carriers. He believes utilizing Penney is a necessary in today’s industry because the strained relations are making it difficult for advisors to find competitive rates for their clients and therefore more difficult to make sales.

“The biggest frustration that advisors have today is the service they get from the insurance companies,” Brown says. “There used to be a lot more companies, so they were competing to get business and because they tended to be smaller they had more capacity to talk to agents and deal.”

Brown says that generally, independent agents lack some of the fundamentals of what underwriting entails, partly because of their diminished exposure to the process, but also because the Canadian MGA system has focused on the product side of the business. When the ranks of underwriters started to shrink, many MGAs weren’t prepared, and advisors lacked a clear understanding of how they were supposed to submit an underwriting package that would get approved.

“If you look at the United States, a large number of MGAs are owned and operated by former underwriters from insurance companies. Many career agents there came to MGAs primarily to get that underwriting expertise,” he says. “In Canada, agents have historically come to MGAs to get product, so I saw an opportunity to try to bring the underwriting expertise in as part of a value proposition for our advisors.”

So why don’t independent agencies bring in underwriters? Brown notes that finding experienced talent is difficult. The shrinking marketplace means there is less opportunity for new underwriters, and a heavier reliance on reinsurance by the carriers means they are far more selective in who they train. Underwriters need to be very precise in meeting stringent reinsurance risk standards.

Not everyone thinks that bringing aboard a high-priced underwriter is the answer. John Lutrin, executive vice-president of HUB Financial, says there are still a large number of carriers, where a larger MGA can leverage their product relationship to get advisors a favorable underwriting decision.

HUB has not brought on its own underwriter, Lutrin says. Instead they have focused on building up the relationship between an in-house marketing team and the underwriters of carriers. In a sense, HUB’s marketing team is a go-between for underwriters and advisors. They specifically focus on leveraging their product expertise and client relationship with a carrier to find their advisors favorable underwriting.

“If you’ve got a case with a specific risk concern that’s an issue and not being addressed, our marketing team steers the business to a certain area where it becomes a non-issue,” he says. “Part of our value proposition is presenting the best possible case to the underwriters on behalf of our advisors.”

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com