Traditionally, insurance products originated almost exclusively from full-stack carriers. Over the past years, alternatives to this model in the shape of Managing General Agents (MGAs), wholesale brokers and capacity providers have grown their presence and impact in the European market.
Across different countries, varieties of MGAs, wholesale brokers and capacity providers are found, ranging in size from insurtech startups to large, established businesses. Notwithstanding the diversity of their business models and local varieties, these three types of business can be described as follows:
- Managing General Agents (MGAs) have delegated authority from carriers to underwrite policies on behalf of the insurer and, in some cases, handle claims. These typically asset-light, tech-savvy organisations focus on specific risks, niches or sectors. Examples are the French Descartes (climate insurance) or Eye Cybersecurity (cyber insurance) from the Netherlands.
- Wholesale brokers are distributors of an assortment of insurance products connecting individual brokers with insurers. Examples of what can be considered wholesale brokers are VEMA in Germany, April from France and Firstance from Italy.
- Capacity providers provide capital for underwriting on a more flexible basis. In Europe, capacity providers are predominantly reinsurers moving “forward” like MunichRe or dedicated insurers like Accelerant, iptiQ or WAKAM.
As these businesses show, alternatives to the full-stack carrier model are growing in importance. They do so in two ways. On the one hand, wholesale brokers and similar “distributors” use technology to situate themselves in between existing players, thereby acquiring important positions in the value chain. On the other hand, businesses like MGAs and capacity providers build new insurance products, outside of full-stack carriers, that serve unmet or underserved consumer needs.
Next to these new actors, embedded insurance propositions are a new category of insurance solutions add even more blur to the familiar distribution dynamics.
Embedded insurance propositions are solutions where insurance products are tightly integrated (“embedded”) into non-financial products or services. For example, commercial insurance products are being directly integrated into accounting software, fleet management systems or cars. The most common examples are Tesla and Apple: both use their immersive customer experience, almost a lifestyle, as the gateway to financial services like insurance (Tesla), buy-now-pay-later (Apple) and more. A strong customer experience is considered a key differentiator for a successful embedded insurance proposition.
These evolving distribution channels, along with other influencing factors, are helping to push the broker market from fragmented to consolidated and from national to international. In turn, this is driving the emergence of European level brokers born from international broker platforms and national champions.