PriyaPatel
TLDR:
- The global insurance technology sector has seen a drop in funding, leading to questions about the role of venture capital in insurance innovation.
- Managing General Agents (MGAs) are becoming attractive venture bets due to their growth potential, entry price, margins, and technology enablement.
In a recent panel discussion in New York, industry experts debated the value of unprofitable insurance businesses in today’s market. While tech advancements are expected to improve insurance operations, insurtechs are facing challenges due to high loss ratios and intense competition for customers.
On the other hand, MGAs, which focus on specific underwriting advantages and rent paper and capacity, are gaining attention from venture investors. MGAs can trade at high multiples of EBITDA and have the potential for rapid growth rates. However, they face challenges in securing capacity and dealing with expensive operational relationships.
With the right entry valuation, focus on growth rate, margins, and tech enablement, MGAs can be successful venture investments. They have the opportunity to address industry-wide issues in insurance and risk management with innovative solutions.
