With the advancement of artificial intelligence and rapid market changes, the insurance industry is developing new strategies for growth.There is a tendency for large insurance brokers to sell non-performing assets.They aim for diversification, cross-selling and strong partnerships, says David Crofts, head of insurance M&A, West Monroe Partners."The big brokers have tried to move in quickly through M&A and have bet on non-core strategies. Many of them have been technology-based or related to product diversification for significant cross-selling," Crofts told InsuranceNewsNet.Meanwhile, the mid-market is exploring opportunities to use managing general agents (MGAs).

MGA

MGAs are authorized to issue policies and process claims."The mid- and low-end markets are trying to build their own MGAs, acquire MGA assets or bring in MGA teams. This is a trend with a lot of market support," adds Crofts.The AI trend is spreading.More brokers using data are gaining ground."Success in wholesale and MGA requires a strong competency in data and analytics," says Crofts."We're seeing more artificial intelligence and intensive analytics in the sales model and broker activation process."

Affiliate markets and cross-selling

Crofts notes that major brokers are aggressively entering related market segments.B2C brokers buy B2B companies for commissions from both segments.Large brokers use mergers and acquisitions to buy companies and diversify products.For example, property and casualty brokersinsurancesbuy asset management and pension companies.They are targeting affluent clients and looking for ways to unlock cross-selling between insurance and pension instruments."Many brokers failed to capitalize on cross-selling. They sold underperforming non-core assets," explains Crofts.

Underperforming InsurTech Companies

Crofts notes that some InsurTech companies are selling assets due to stiff competition and growth difficulties."A sale is best for the asset to get investment, recapitalize and change direction. That's difficult when it's part of a large organization," says Crofts.

Middle market and MG

Mid-market operators see MGA as an opportunity to diversify and reduce risk while preserving the brand."MGA provides greater strategic flexibility in risk-taking," says Crofts."An MGA in a brokerage is a smart strategy. Business can be routed through a wholesaler or directly to an MGA for specific programs," he adds.

Artificial intelligence drives competition

The rapid adoption of artificial intelligence is a key trend.Data gives small and mid-sized brokers an edge."The market is moving away from the personal selling model. Commercial and personal lines are moving towards digital selling and more careful selection of risk," says Crofts.This spurs asset sales.Brokers sell underperforming assets to invest in data and digital technology."Brokers are simplifying their operations and focusing on the core brokerage business. Then they're investing in data and digital technology," says Crofts.

West Monroe Partners is a Chicago technology consulting firm.It was founded in 2002 and has over 2,000 employees in 10 offices worldwide.

Frequently asked questions

Why are major insurance brokers selling underperforming assets?

Answer: Large brokers sell non-core or underperforming assets to focus on core business and free up capital for digital investments.Many of these assets are the result of previous aggressive mergers and acquisitions.

What are MGAs (Managing General Agents) and why are they in high demand?

Answer: MGAs are companies that are authorized to issue policies, assume risk and process claims on behalf of an insurer.For brokers, the MGA model provides an opportunity to expand their business without fully assuming the risk and complexity of insurance business.MGAs provide greater flexibility, faster new product development and more precise risk selection.Therefore, the middle market is actively building its own MGAs or acquiring existing ones.

How is artificial intelligence changing the competition between insurance brokers?

Answer: AI enables much faster data analysis, more accurate pricing and more efficient risk selection.Small and mid-sized brokers that implement AI early gain a serious advantage over larger ones that have traditionally moved more slowly.Data and automation are replacing the in-person selling model, opening up the market to new players.That is why brokers are massively investing in AI tools and digital processes.

Why are InsurTech companies starting to sell parts of their businesses?

Answer: Many InsurTech companies are under intense pressure to grow as competition in the sector becomes increasingly aggressive.Insufficient investment and the difficulty of maintaining complex technologies in large organizations forces them to sell assets.Their sale allows for recapitalization and a new focus that is difficult to achieve inside large corporate structures.This is a natural stage in the innovation cycle.

What has been the biggest influence on M&A deals in the insurance sector in recent years?

Answer: The combination of technological change, social inflation, and complex new risks, such as cyber risk, is accelerating market restructuring.Brokers buy companies in related segments – for example, asset managers – to expand their services and reach affluent clients.It invests in data, analytics and digital sales models, resulting in the sale of underperforming assets.The MGA model and AI are already among the main drivers of deals and industry change.

Trends in the insurance industry with the advent of artificial intelligence

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