Category: Business Process Services

Transformation Imperatives for Wholesalers and MGAs in Insurance: Exploring Opportunities to Unlock the Next Growth Phase | Blog

Managing General Agents (MGAs) and wholesalers are becoming increasingly relevant in the insurance ecosystem due to the unique advantages they have over brokers/agents. With five key transformation levers described in this blog, MGAs can overcome challenges and unlock a wave of unprecedented sustainable growth. Technology and business process services (BPS) providers can help MGSs reduce costs and increase their digitization and automation intensity. Read on to learn more.

As insurance intermediaries that represent carriers, MGAs provide insurance products to retail agencies and insureds. They are frequently positioned between other intermediaries, such as retail or wholesale brokers and insurance firms. MGAs also are qualified to underwrite and bind coverage as well as perform customer support services, including policy issuance and claims management. Overall, more than 1,000 MGAs are in the US, and 250-plus operate in the UK, covering nearly 5-10% of the overall insurance market.

Role of MGAs in the insurance ecosystem

The business model of MGAs stands apart from full-stack insurers and agents/brokers by the greater span of control and the profitability they generate. On the product side, MGAs have the flexibility to build products in collaboration with the insurer but may have a lower appetite for innovation and slower speed to market, depending on the insurer’s capability and commitment. On the customer relationship side, these specialized agents have full control over all customer activities.

According to a McKinsey report, 43% of top 100 Property and Casualty (P&C) insurers have at least one MGA relationship to source new premiums. Various types of MGAs operating in the ecosystem are illustrated below.

Screenshot 2023 03 17

MGA profile

MGAs keep their financial profile stronger like other intermediaries in the ecosystem by achieving 20-30% EBITDA. MGAs are moderately capital efficient due to low setup cost, no legacy platform burden, quick monetization opportunity, and lean team setup.

However, they need to share the profit pool with insurers. The major revenue streams for MGAs are commission paid by insurers, risk performance-based commission, and offering additional services like claim administration and inspection.

Various value chain elements performed by MGAs include marketing, sales, distribution, underwriting, policy issuance, claims handling, policy review, customer services, risk management, policyholder communication, and renewal management.

Challenges MGAs face

Despite the significance of their role, MGAs face the following challenges in running operations effectively:

  • Complying with regulations: MGAs must keep up with the most recent rules and compliance standards because insurance regulation is always changing and is state-based. Penalties, fines, and legal repercussions may arise from breaking rules
  • Attracting and retaining talent: MGAs face hurdles in attracting and retaining skilled and experienced employees who can provide quality services to clients
  • Managing risks: On behalf of insurance companies, MGAs are in charge of risk management. This requires agents to have a thorough understanding of the insurance products being supplied, the underlying risks, and the potential effects of these risks on the organization
  • Balancing client demands with profitability: Client demands for new products, services, and coverage may not be aligned with the profitability goals of the MGA
  • Staying competitive in a rapidly changing industry: MGAs must stay abreast of advances in technology, goods, and services in the insurance sector to remain competitive
  • Competing with increasing industry consolidation: With large companies getting bigger, it is more difficult for other players to compete effectively

Five transformation pillars

To remain competitive, MGAs must find new ways to transform their businesses by leveraging new technologies and business models, as shown below.

Picture2 5

Let’s explore each of the elements in the innovation framework in more detail:

  1. Embrace digital transformation: MGAs can streamline operations, enhance customer experience, and cut costs by utilizing digital technologies, including automation, artificial intelligence, and cloud computing. To improve their decision-making and expand their business, MGAs can benefit from unique insights into consumer behavior and market trends provided by digital transformation
  2. Partner with other ecosystem providers: Partnering with InsurTechs and technology and BPS providers is an effective way for MGAs to embrace digital transformation and wide-scale automation levers like Robotic Processing Automation (RPA), Artificial Intelligence/Machine Learning (AI/ML), Natural Language Processing (NLP), Optical Character Recognition (OCR), etc. By leveraging the expertise and technology of these providers, MGAs can access new tools and capabilities, helping them remain competitive and grow their business.
  3. Embrace a customer-centric approach: Young customers prefer a digital-native approach and demand slick web and mobile interfaces to engage; direct-to-consumer (D2C) distribution platforms to buy; and two-way SMS messaging, chatbots, and interactive documents, forms, and videos to communicate. By offering these services, MGA insurance companies can not only improve customer satisfaction but also build deeper relationships with their customers, which can lead to increased loyalty and longer-term engagement
  4. Enable data-driven decision-making: Data and analytics play an increasingly important role in the insurance industry, and MGAs must leverage these tools to remain competitive. By collecting and analyzing data from multiple sources, such as customer interactions, market trends, and operational performance, MGAs can gain new insights into their business, enabling them to make more informed decisions and drive growth
  5. Foster a culture of innovation: Innovation is key to remaining competitive in the insurance industry, and MGAs must foster a culture of innovation to stay ahead of the curve. This requires a commitment to investing in new ideas and technologies, as well as encouraging employees to think creatively and embrace change.


These five transformation levers can help mitigate challenges like compliance adherence, talent management, low profitability, risk management, and strong competitive intensity by ensuring a culture of innovation, enforcing client-centricity, utilizing data analytics, outsourcing non-core functions, and embracing digitization.

Sourcing implications

MGAs operate in an area requiring specialized knowledge and experience in specific insurance markets and products. Companies typically prefer to keep core functions in-house and outsource non-core traditional and technology-led activities.

Multiple tech and BPS service providers work across the ecosystem with insurers, agents, brokers, insurtechs, and MGAs that have built superior capabilities to provide services across multiple business lines and geographies.

Service providers also offer the latest tools and technology, superior customer experience capabilities, operational efficiency, Service Level Agreement (SLA) management, flexibility to ramp operations up and down, superior talent, a low-cost advantage, best-in-class lean operations, improved risk management, and much more. MGAs can outsource either a part of the value chain or engage in end-to-end transformative deals, depending on their appetite for outsourcing, process maturity, and management buy-in.

Some of the areas within MGA’s and wholesaler’s process value chain that can be outsourced are as follows:

Screenshot 2023 03 17 092024

MGAs need to evaluate the service provider’s capabilities after carefully considering their expertise, experience, cost arbitrage, flexibility, security, business continuity, delivery footprint, talent maturity, technology, infrastructure, governance approach, and client-centricity.

Analyst firms like Everest Group can help evaluate these capabilities through its proprietary PEAK Matrix® assessment and impartially rank the service providers as leaders, major contenders, and aspirants, as well as provide expert commentary to help enterprises make better-informed decisions.

To discuss MGAs in insurance and outsourcing trends, please reach out to [email protected] and [email protected], and stay updated by accessing our latest research on insurance business processes.


Dark Side of the Moon: Generative AI Spurring Rising Trust and Safety Intervention | Blog

The rise of generative Artificial Intelligence (AI) has been nothing short of a technological revolution. From art to advertising, it has transformed content creation and consumption. As we dive deeper into generative AI, we can’t ignore the elephant in the room: How will it impact enterprise Trust and Safety (T&S) policies and operations? Read this latest blog in our series to learn about the impact of generative AI on T&S, potential challenges for enterprises, and recommendations to navigate T&S waters.

“In the age of generative AI, trust brokers will become increasingly necessary and increasingly valuable in the marketplace.” – Hendrith Vanlon Smith Jr., CEO of Mayflower-Plymouth

Generative AI is making headlines as organizations discover exciting breakthroughs by investing in developing their own models. These advanced models have demonstrated remarkable abilities to generate realistic and diverse outputs that can be useful in various applications such as content creation, language translation, image and video synthesis, and even drug discovery. However, valid potential ethical concerns arise around deepfakes, truthfulness (or lack thereof), biased output, plagiarism, and malware, among others. Let’s explore this further.

Generative AI is the future of content but introduces additional complexities for enterprises

Generative AI is a type of artificial intelligence that can create new and diverse data forms, including images, audio, text, and videos. This technology has been around for some time, but recent advancements in models such as ChatGPT, DALL-E 2, Midjourney, and others have brought generative AI into the spotlight. While generative AI has led to an explosion in potential usability across diverse fields, it also presents additional complexities for enterprises to moderate it effectively, as illustrated below.

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As generative AI constantly evolves with daily updates and new models contributing to its increasing complexity, heightened protection and care are necessary to avoid lasting negative consequences, such as reduced brand value and loss of customer trust. To ensure customer protection and platform safety, enterprises require dedicated T&S teams more than ever.

Generative AI impacts the entire T&S value chain to varying degrees

Picture2 3

Below are some examples of emerging T&S use cases:

  • Getty Images, a UK-based photo and art gallery, sued Stability AI in the UK and US for copying over 12 million photos without permission, alleging copyright infringement, trademark violation, and unfair competition
  • Twitch, a streaming platform, temporarily banned the AI-generated sitcom “Nothing, Forever,” a parody of the popular TV show “Seinfeld,” due to the use of transphobic language in an episode

T&S needs to keep pace with generative AI

Current T&S operations are lagging behind the evolution in various content types and need to step up their game to deal with the nuances of generative AI.

T&S services:

Effectively moderating generative AI content requires human moderators to possess a blend of technical expertise, ethical consciousness, and critical thinking abilities. A lack of these attributes can result in incorrectly flagging or removing content, as evidenced by the artist who was banned from a well-known art community by the moderator on accusations of using AI to create their artwork. Moderation of AI-generated content also can be limited by a lack of support for moderating niche languages.

Moreover, training the AI requires moderators to be exposed to more dangerous and harmful threats over longer periods, taking a toll on mental health and productivity. For example, a service provider hired by a tech-based company to train its GPT model terminated the contract due to prolonged exposure to harmful content.

T&S solutions:

AI content moderation has room to improve its maturity and ethical technology to effectively handle complex content formats such as generative AI content. With generative AI now achieving multi-modal capabilities, the technology also needs to become more robust to moderate all types of generative AI content, including audio, video, and livestream. The shortage of training data leading to the lack of explainable AI and contextual understanding also poses a significant hurdle for content moderation that relies on large datasets.

Efforts to create effective AI-generated content detectors are underway, but their accuracy remains a challenge, with current capabilities falling short of achieving 95% reliability. In the race between generative AI creating harmful content and T&S AI moderating it, generative AI seems to be leading its T&S counterpart.

Enterprises need to amplify their FOCUS on T&S to deal with the nuances of generative AI

In this rapidly changing AI world, implementing the FOCUS framework illustrated below can enhance enterprises’ capabilities in handling generative AI complexities to safeguard users.

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Strategic providers can help enterprises maintain the FOCUS framework in the following ways:

  • Upgrade algorithms and training datasets: Partnerships can help maintain the robustness of enterprise T&S platforms by improving algorithm accuracy and including a wide and large variety of data sets to train the T&S technology
  • Approach innovation collaboratively: Enterprises should look outward for innovation in addition to in-house investments. The right partner can help explore new technologies, such as explainable AI and responsible and ethical AI, to detect patterns and anomalies in generative AI content and assist enterprises in keeping their platforms secure
  • Provide policy management support: Enterprises also require constant market monitoring in addition to collaboration with regulatory bodies and policymakers to identify triggers, which can potentially impact existing T&S policies
  • Customize moderation rules: Operationally, generative AI requires customized moderation rules that are specifically geared to identify and highlight AI output that violates enterprise guidelines or other policies
  • Deliver holistic platform-based T&S solutions: Service providers increasingly are partnering with technology providers that offer comprehensive, scalable platforms integrating various content handling technologies and human capabilities into a unified system

Looking forward to T&S for generative AI brings many questions

As generative AI evolves, the following questions need to be addressed before charting the right investment strategy for T&S:

  • Can generative AI be used to build a T&S solution that replaces current AI models?
  • Will data privacy regulations and the reluctance of peers to share proprietary data limit companies’ ability to collect and use data for generative AI training?
  • Will content generated by AI be used to train even more AI models?

As we continue to make progress in the AI field, the possibilities for generative AI are endless, and imagining a future where AI-generated content becomes the norm is conceivable. However, it’s essential to approach this development cautiously and diligently, taking into account all the potential implications. As the future of generative AI unfolds, its success will depend on our ability to balance its power with our responsibility to use and moderate it wisely.

For our other recent blogs on how ChatGPT will impact various industry sectors, see Impact of ChatGPT and Similar Generative AI Solutions on the Talent Market, Can BFSI Benefit from an Intelligent Conversation Friend in the Long Term, and ChatGPT Trends – A Bot’s Perspective on How the Promising Technology will Impact BPS.

To discuss how generative AI will impact the T&S process in detail, please reach out to Abhijnan Dasgupta and Shubhali Jain.

Discover more about generative AI in our LinkedIn Live, Generative AI and ChatGPT: Separating Fact from Fiction.

The Recessionary Conundrum: What Lies Ahead for Healthcare Payers?

A looming global recession may finally take its toll on payers who have escaped prior economic challenges. Let’s take a look at the healthcare trends influencing decision-making by payers, the markets most likely to be affected, and the actions payers can take with the uncertain outlook.

Wall Street predicts that the probability of a global recession in 2023 is 61%, well above the stable benchmarks. Although inflation has eased up marginally since the last quarter, tighter financial conditions and weaker global growth still indicate a potential downturn.

The healthcare industry historically has weathered economic collapses better than core industries that are generally more severely impacted. A Forbes assessment shows that while the US economy (as measured by GDP growth) plunged into recession eight times over a 60-year period from 1960-2020, healthcare expenditure growth never shrunk, often outgrowing gross domestic product (GDP) as illustrated in Exhibit 1.

This stability is primarily because impacted employees either opt for subsidized government programs or forego medical care, as applicable, pushing the healthcare cost to the future. As a result, health plans tend to be relatively less affected due to recessionary headwinds. In fact, reports suggest that earnings for healthcare payers declined only by 27% compared to a 77% decrease for the overall S&P 500.

Exhibit 1: Real GDP growth and national health expenditure growth 1960-2020
Exhibit 1: Real GDP growth and national health expenditure growth 1960-2020

Although many healthcare payers posted strong growth rates at the end of fiscal year 2022 as shown below (Exhibit 2), the results may not be as positive in 2023, particularly for employer-sponsored or provider-owned health plans.

Exhibit 2: Year-over-year growth rate by revenue for healthcare payers
Exhibit 2: Year-over-year growth rate by revenue for healthcare payers

The overall impact on the payers in the fiscal year 2023, however, will be determined by several upcoming trends. Let’s look at some of these influencing factors in detail below.

Exhibit 3: Major healthcare trends defining the decision-making process of payers in 2023
  • Medicaid redetermination: As states kickstart Medicaid redetermination in April 2023, over 15 million Medicaid members are expected to lose their enrollment after the renewal process. Several payers, such as Centene, expect to lose about 2.2 million members over the next 18 months. On the other hand, payers like Humana and Molina Healthcare project their Medicaid membership to be largely stable due to new Medicaid contracts offsetting redetermination losses
  • Prior authorization rule: The CMS Interoperability and Prior Authorization rule requires regulated payers (Medicaid, Medicare, CHIP, and QHP) to utilize Application Programming Interfaces (APIs) that give healthcare providers more streamlined access to data. Payers will be required to maintain these APIs using the Fast Healthcare Interoperability Resources (FHIR) standard. This regulation is expected to bring effective workforce utilization, improved data exchange, reduced appeals, and, in turn, more timely claims disbursal
  • Inflation reduction act: Starting this year, Medicare will be allowed to negotiate prices for prescription drugs with pharmaceutical companies. Apprehensions are high that this will lead to cost-shifting to privately funded and employer-sponsored health plans. Or, the reverse also could be true, and privately-funded plans may demand similar negotiations along the lines of Medicare to avoid overpaying for healthcare. Moreover, the Part D plans will have to bear higher responsibility in the catastrophic phase as the law puts a spending and inflationary cap on out-of-pocket expenditure beginning in 2025
  • Focus on alternative care market: Payers are striving to strengthen preventative care and ensure end-to-end offerings, as many big players (e.g., United HealthCare, CVS Health) have invested in home, virtual, and alternative care. The race to outcomes-based care is shifting from retrospective to proactive and comprehensive health management through multiple integrations
  • Member experience and STAR Ratings: With the Consumer Assessment of Healthcare Providers & Systems (CAHPS) member experience weights increasing to four times in 2023, ensuring top-of-the-class member experience will remain a priority for health plans

Impact of the potential downturn on the healthcare payer market

So, how specifically will payers be impacted? It’s hard to say, given the global inflation outlook improvement. But lessons from the past indicate that a sustained period of economic uncertainty will impact both the government and the private markets in the following key markets:

  • Privately-funded market: Markets such as employer-sponsored health plans could lose members due to layoffs and loss of employee-sponsored coverage. Payers such as Cigna, that have significantly high commercial membership (Exhibit 4), could feel the heat of the competition from the health insurance exchange (HIX) and Medicaid plans. However, these losses can be offset if payers can retain these members in other product lines. Alternatively, having a diversified business portfolio such as a pharmacy or data services also may provide a cushion against medical membership loss
  • Government market: While the Medicaid market would traditionally gain membership in a recession, instead it will see the combined effect of redetermination and a potential economic downturn. As some of the members who lose employer coverage join Medicaid, the drop in membership might be less than expected after the redetermination process. The impact on Medicare, however, is expected to be relatively insignificant. Overall, the payer mix might experience a shift toward government business

Lastly, the uninsured population may experience an uptick due to information asymmetry and administrative complexities. According to an assessment done from 2007-09, only some of the insurance loss from a lack of employer coverage was offset by added public coverage, leading to a 5.6 million rise in uninsured adults. While the Affordable Care Act (ACA) has lowered the uninsured population, an economic downturn potentially can add to the current uninsured coverage.

Exhibit.4: Percentage of membership in the commercial business

What should payers do in this uncertain market outlook?

With the market unpredictability, healthcare payers will have to take calculated measures to prevent business impact. Here are four actions they can take:

  1. Focus on operational efficiencies: Healthcare providers are more likely to be impacted by a downturn, pushing them to negotiate for higher contract prices. Payers will have to explore ways to offset any price hikes. This can lead to increased outsourcing and offshoring of traditional processes, such as provider and claims management to ensure lower administrative spending and higher operational efficiencies
  2. Invest in preventative care: Price-conscious members may move to higher deductible plans and avoid care, particularly preventive services, leading to lower utilization. This can have lingering long-term effects, particularly for members with multiple chronic diseases. To combat this, payers should identify susceptible members, invest in areas such as social determinants of health (SDoH), and devise strategies that prevent care gaps and discontinuity
  3. Increase digital member engagement efforts: Millions of members lost their coverage in the last recession despite being eligible for other plan options, partly due to a failure in getting the right information and comprehensive engagement with their insurers. To avoid this from happening again, payers will have to ramp up investments in member engagement to avoid losing members. Regional health plans and the Blues will have to bring in digital-enabled solutions that help to understand member needs and provide forward-planning insights. Support from third-party services providers who offer customized, plug-and-play customer experience (CX) solutions can help meet this need
  4. Upgrade systems: Several payers with strong capital support can undertake digital transformation efforts to replace legacy systems and move to interoperable, connected ecosystems that will help improve administrative as well as care outcomes. However, this might only be applicable for payers who experience limited utilization and payouts due to the downturn.

Outlook for service providers

These measures will require service providers to proactively engage with healthcare payers and focus on three levers – the right clients, the right capabilities, and the right value addition. This will enable service providers to aim for the right opportunities such as member engagement and preventive care and ensure sustainable growth in an uncertain economic environment. Finally, in a highly competitive market like payer services, service providers will have to offer targeted digital and traditional Business Process Outsourcing (BPO) services to serve the right client need and differentiate themselves with unique value propositions refined as per the prevailing market demand.

To learn more about healthcare payer and provider trends, contact Lloyd Fernandes or Vivek Kumar.

To learn about the changes in the pharmacy benefits management (PBM) industry, such as increased regulatory scrutiny surrounding pricing transparency and rebate-sharing rules, watch our video, Pharmacy Benefits Management: The Next Big Healthcare Opportunity.

You can also learn more about How to Deliver Hyper-personalized Customer Experiences in Life Sciences in this LinkedIn Live session. 

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