Navigating Regulatory Scrutiny: Best Practices for MGAs and TPAs in the Evolving Insurance Landscape

Swiss Re estimates that premiums will see a significant increase in the coming years, with an 8% growth projected for 2024 and a 5% increase for 2025. This growth is accompanied by a rise in the utilization of Managing General Agents (MGAs) and Third-Party Administrators (TPAs), especially in the U.S.

As the insurance landscape evolves, so does the regulatory environment, placing MGAs and TPAs under increased scrutiny. Amid this heightened regulatory attention, the question arises: what does best practice look like for these entities, and what actionable advice can be given to carriers, MGAs, TPAs, and compliance teams to remain proactive and compliant?

Louisiana recently updated its regulations for MGAs through House Bill 672, aligning many aspects with the National Association of Insurance Commissioners (NAIC) Model Act. The new legislation introduces additional financial reporting requirements and other obligations for MGAs and their associated insurers, effective Aug. 1, 2024. These changes come in response to a series of insolvencies among Louisiana insurers that use affiliated MGAs, highlighting the need for increased oversight and regulation in the sector.

Pro Global’s analysis of over 200 U.S. audits reveals critical insights into the current state of compliance within MGAs and TPAs. Key areas requiring attention include compliance policies and procedures, accurate policy documentation, adherence to binding limits, and sanction checks. Additionally, poor claims handling and inadequate coverage analysis pose significant risks to companies, emphasizing the need for enhanced claims management processes.

Cybersecurity is another crucial area that requires attention, as MGAs and TPAs are increasingly vulnerable to cyber threats. Implementing robust cybersecurity measures and conducting regular vulnerability assessments can help protect sensitive data and maintain business operations’ integrity.

In conclusion, the evolving regulatory landscape and increased scrutiny on MGAs and TPAs necessitate a proactive approach to compliance and risk management. By strengthening compliance frameworks, enhancing operational processes, and prioritizing cybersecurity, these entities can drive sustainable growth and build a solid foundation for the future. Proactive audits and continuous improvement are essential in navigating this evolving landscape successfully.