Waiting for the MGA-MGU MPL Industry Revolution

By William Pitt

The past decade has seen a quiet revolution in the provision of many lines of insurance, with managing general agents (MGAs) and managing general underwriters (MGUs) luring talent from insurance companies and playing an expanding role in the value chain. To date, the medical professional liability (MPL) markets have been only modestly affected by this revolution.

MGAs and MGUs are intermediaries between insurance carriers and brokers/agents. Unlike brokers, they are legally agents of the insurance companies that provide them with underwriting capacity. The expressions “MGA” and “MGU” are often now used interchangeably, but MGUs sometimes have a slightly broader role. Both operate with delegated authority from carriers to underwrite and bind business and—often—to adjust and settle claims.

On the face of it, the fit between MGAs and the MPL market—particularly the richly diverse market for allied health insurance—appears to be excellent. The historic playbook for MGAs and MGUs has been to identify an underserved niche in which above average underwriting returns can be achieved and then used to create a program to serve that niche market.

How MGAs and MGUs Serve Niche Markets

This was the approach taken by Susan Preston, the founder of Professional Program Insurance Brokerage (PPIB), which illustrates how MGAs and MGUs approach the MPL market. In the 1990s, Preston saw a gap in the insurance market for what are known as permanent cosmetic technicians, providing services such as tattooing of eyebrows, eyeliner, and lips. She accordingly established in 1999 a nonprofit association, the Society of Permanent Cosmetic Professionals, to set and promote industry standards for the profession and, through this collaboration, developed underwriting standards, applications, and endorsement wordings that continue to support this market.

Expanding beyond this base, PPIB today insures a diverse range of medical and medical-adjacent specialties including medispas, tattoo and body piercing artists—an early area of focus—and allied health classes such as compounding pharmacies, drug testing labs, and clinical trials.

Few parts of the market offer the breadth of niche opportunities presented by allied health. A number of MGAs have a strong focus on this market as seen in Figure 1 focusing principally on small business risks, where they can leverage agile technology to offer a high standard of service in a cost-effective manner.

Figure 1

MGAs in the MPL Industry

By far the most ambitious MGA to have launched in the MPL market is Now Insurance, founded by the former CEO of Greenhill, Philip Cabaud, in early 2020. A year in the making, the company’s platform permitted a wide range of healthcare professionals, including nurses, nurse practitioners, pharmacists, and home healthcare aids, to purchase coverage almost instantaneously online. The portal, launched in March 2020 in the early stages of the pandemic, offered the ability to apply for and secure coverage in three minutes.

Last year, Now began offering coverage to physicians and physician groups, rolling out what it described as a state-of-the-art underwriting process to enable brokers to obtain a quote using only the physician’s or group’s NPI number, obviating the need for an application. “The platform gathers nearly all the information needed to effectively underwrite this class without an application, lifting a burden off the broker and their clients," said Patrick O’Doherty, Now’s executive VP of underwriting.

Now remains an outlier, however, in the medical professional liability market. Other specialty lines of business, notably cyber insurance, have seen far larger incursions from MGAs seeking to disrupt the existing market. MGAs such as At-Bay, Coalition, Resilience, and Cowbell Cyber have combined cyber security services with coverage in innovative ways, while creating customer and broker experiences that few traditional insurance companies can rival. In the MPL market, MGAs have not to date played a very disruptive role. With the exception of Now, coverage innovation has largely remained the preserve of traditional insurance companies such as QBE, Beazley, Great American, and Hudson.

Competitive Pressures Strong in MPL MGA Landscape

The MPL MGA landscape has scarcely been tranquil, however. Consolidation pressures are strong and the major wholesale brokers in particular have been active acquirors. Ryan Specialty, Amwins, and CRC have led a charge towards what might be characterized as vertical integration in certain market segments, notably professional liability coverage for long term care organizations.

The large wholesale brokers offer access to massive retail distribution networks that are a critical resource for MGAs that serve widely dispersed small business markets. They also bring strong multifaceted carrier relationships that make the perennial vulnerability of independent MGAs—that their capacity may be withdrawn at any time—far less acute.

MGAs Accelerate the Innovation Cycle

It remains unclear how well the traditional insurance market will respond to the challenge posed by continuing innovation in the medical arena. Brokers are currently reporting an acute lack of insurance capacity for pharmacies preparing weight loss medications involving compounded forms of semaglutides. These forms are permitted when approved versions are officially in short supply, as has been the case for Ozempic and Wegovy, but the FDA reports that it has “received adverse event reports after patients used compounded semaglutides.”

This is the sort of coverage challenge that the insurance industry has historically been slow to address. In cyber and in weather perils affected by climate change such as wildfire, hail and flood, MGAs have helped to accelerate the innovation cycle. It remains to be seen whether they will come to play such a pivotal role in the MPL market.