● High friction in processes leads to increased expenses, higher loss ratios, and inefficient operations. ● Reducing the Friction Gap helps insurers achieve profitable underwriting and efficient operations . ● When the Friction Gap impacts timeliness and service, especially to agents, it can impact application volume and hit ratio. If an agent cannot get a quote or an underwriting decision when they need it, they are less likely to bring business to an insurer or may only place less desirable business with the insurer. Most insurers (based upon LOB and market) want to be one of the top three insurers an agent uses, friction issues may jeopardize this. Why it matters to MGA’s In some ways, MGA’s are more impacted by friction than insurers. Managing General Agents (MGA’s) act as the underwriter on behalf of the insurer. Their income is generated by a commission from the insurer and most relationships include a profit sharing component, but smart MGA’s focus on maximizing the value of their commission and view the profit sharing as a “nice to have”, not something they need to stay afloat. Living on commissions, minimizing friction to the MGA is critical because any friction reduces their overall revenue and profitability. Poor service to underlying agents bringing business to the MGA (sub-producers) may decrease the amount of applications they receive so providing an efficient, agent friendly environment is critical MGA’s do not file premium or results with AM Best so a full AM Best analysis is not an option for MGA’s but the messaging and overall model remains the same. The “Combined Ratio See-Saw” Problem: ● Traditionally, insurers reduce loss ratios by increasing expenses (usually by hiring more staff). Insurers have a habit of “throwing bodies at the problem”, where they hire or assign more people to address a problem that needs to be resolved. The hope is that this will improve loss results but this is not guaranteed. ● This creates a see-saw effect , where one ratio improves at the cost of the other. ● Technology & automation offer a way to reduce friction without increasing costs. Insurers can get off the Combined Ratio See Saw by investing in solutions like Salesforce that can help them improve results while keeping major costs (such as headcount) flat