WIN Magazine - Spring 2016 - (Page 23)

FEATURE HOW THE CLOUD LEVELS THE PLAYING FIELD FOR MGAs BY GORDON WINGATE T ECHNOLOGY HAS TURNED out to be a double-edged sword for the MGA community. On the one hand automation has clearly demonstrated the power to boost any MGA's productivity ratio (earned premiums : headcount). The paperless office is finally a reality, as is the ability for producers, managers, and staff to work remotely from virtually anywhere. Above all, custom web portals can streamline the customer experience for agents like never before, improving the firm's ability to retain and build business. All good news, right? But this evolving technology has come with increasing financial costs that have hit smaller MGAs the hardest. Running these complex systems with their demanding database and document storage requires the same initial number of servers and the same level of IT management expertise for the smaller MGA as it does for a larger one. When an MGA grows its policy underwriting by more than FIVE TIMES its current volume, it does not even double the cost of the system. This IT expense ratio advantage that larger MGAs enjoy has driven a significant number of acquisitions in the MGA world of late. Larger firms can use these economies of scale to win more business and run leaner while the minimum cost to play means that smaller firms with lower premium revenue must make sacrifices to their profitability, their level of automation, or worse, the reliability of their critical applications. Donna Buto is one of the owners of Program Underwriters, an MGA in southern Florida. "We run an integrated enterprise management solution because we want the absolutely best tool for working with our customers and running our business. But we have struggled at times to keep good performance and reliability because of our own ability to properly support it. We've used both outside IT companies and an internal IT person. We have also been paying our vendors to support their applications since we couldn't find any local experts. We ended up with support that was piecemeal, expensive, and distracting. And, keep in mind, even if I'm able to retain a good internal IT person, that one employee represents 6% of our staff." THE CLOUD IS THE GREAT EQUALIZER Cloud blogger Chuck Hollis once said that in the end, cloud is just another word for 'somebody else's computers.' Clearly the biggest reason so many companies are moving to cloud computing is to get away from the headache of owning big server and storage systems. CFOs love the predictability of knowing what their IT infrastructure will cost every month. There are cost savings including lower IT payroll as well as the costs of providing space, power, and cooling to server rooms and datacenters. In a cloud operating model, companies only pay for what they use and when they need it. What's more, someone else handles the capital investment and keeps the IT running. Plus, software and hardware are always updated and maintained. Yet moving to the cloud is more complicated for an MGA whose goal W I N | S p r i n g 2 0 16 | 2 3

Table of Contents for the Digital Edition of WIN Magazine - Spring 2016

Surviving the Cyber-Liability Avalanche: How Contracts with Business Partners and Vendors Expose Companies to Cyber Liability
Data and Analytics: Another Dimension to Underwriting in the Specialty Insurance Market
Embracing New Technologies & Attraction Marketing Strategies
How the Cloud Levels the Playing Field for MGAs
Staying Agile in an Era of Disruption
Standardizing the Non-Standard Industry: E&S Working Group Champions Automation and Efficiencies
Using Technology Communities to Foster Innovation in the E&S Wholesale Distribution Model
Autonomous Vehicles: Considerations for Personal and Commercial Lines Insurers
AAMGA 2016 HeatMap of Emerging Issues and Trends: Challenges and Opportunities for the Specialty Insurance Industry
A Personal Note on Leadership: There’s Hope in the Young
In the WIN-ner’s Circle: Jim Mastowski and Coryn Mastowski Thalmann of Jimcor Agencies
Index of Advertisers

WIN Magazine - Spring 2016