The Carrier Is Giving You Their Pen: Sproutr on Program Design

Every few weeks someone tells me they're starting an MGA. They have the distribution, the niche, the underwriting thesis. What they usually don't have is a product a carrier can actually say yes to. That gap is where Sproutr lives. The Solebury, PA firm designs, builds and places insurance programs for MGAs, MGUs and carriers, and it just promoted Jeff Breault, CPCU, to Head of Insurance, putting program management, actuarial, product development, compliance and filing under one leader.

Jeff joined Sproutr in 2023 as its fourth employee after running data analytics and pricing as a Director of Commercial Lines at Nationwide, and before that bringing a utilization-based commercial auto product to market at an insurtech. I sent written questions to Jeff and to Sproutr Founder and CEO JoAnne Artesani. Jeff took two, JoAnne took the rest. If you're thinking about launching a program, or you're a carrier or front being pitched one, read this twice.

The interview

Jeff, you went from running pricing and analytics at Nationwide to being employee #4 at Sproutr. What did big-carrier pricing prepare you for in program design, and what did it not?

Jeff Breault: Two things carried over directly. The first is knowing what carrier actuaries need to see. A rate plan can carry a few assumptions that are genuinely unknowable, but the base rates and most of the structure must rest on real data. Building to that standard from the start makes the conversation with a carrier's actuarial team much shorter. The second is building the filing support first. A program filed without it ends up defending its rating and coverages state by state after the fact, and the result is a patchwork of deviations and elements that can't be justified everywhere. Support built up front keeps the approved program close to what was designed. I bring both to every Sproutr engagement with a rating component.

What carrier work can't teach is the other side of the table. At a carrier, you are the capacity. I'd already been on the program side, building a product and earning a carrier's support from the outside; the Nationwide experience reinforced the carrier lens. Our engagements need both views.

The other gap is range. A carrier seat works within lines that are largely defined. We regularly see concepts at Sproutr where determining the line of coverage is part of the work, and there is no natural rating analog to use. Figuring out how to rate those is the fun part, and it's where having sat on both sides of the table pays off. We know what a carrier will accept, so we can be inventive without building something nobody will approve.

Program founders often show up with a strong idea and little experience in how a program gets designed, priced, filed and governed. What's the most common gap you see in a first pitch?

JoAnne Artesani: I rarely see any real estate devoted to the actual insurance product the MGA is asking the carrier to authorize. While this seems to either be a silent request for the carrier to solve it for them, it demonstrates a lack of command of what the program is attempting to solve. The risk itself is defined by the product that supports it, so the absence of it stops the evaluation. Underwriting defines the "what," product defines the "how." Both are needed.

JoAnne, why put program management, actuarial, product development, compliance and filing under one leader instead of separate practice heads?

JoAnne Artesani: Sproutr has always viewed program development to be multi-disciplinary and non-linear work. Structuring our leadership around the outcome rather than the function further reinforces this thesis. This structure reduces the risk of missing context between stakeholders who offer a unique perspective of a solution from their seat.

Between concept and first bound policy, where do new programs most often get stuck: capacity, filings, actuarial support, or systems?

JoAnne Artesani: I think it's important to note a distinction between new programs and new program operators. New program operators underestimate the importance of demonstrating their credibility to their risk partners, which comes from a combination of demonstrable distribution, plus strong underwriting thesis and competency, plus supported actuarial evidence. These are only some ingredients (and no guarantee) toward securing capacity. Systems and operating processes play a supporting role but cannot be punted as an afterthought.

New programs within established organizations have an advantage over new operators in that they have (ideally) already demonstrated an ability to deliver the plan they intended to deliver. Where we've seen existing programs fall short is the assumption that their prior experience buys them an underwriting shortcut. In all cases, the request to support a new program or expansion of an existing one needs to have supported, justified underwriting articulation and governance. The carrier is giving you their pen; you must show them you can manage it so they don't have to.

How should a new MGA staff its insurance function in year one? What has to be in-house, and what can it rent?

JoAnne Artesani: This is a nuanced answer and there is no one right way to configure an MGA operation. Broadly speaking, a carrier is granting authority to a responsible, credible person, not technology. An MGA must have a program owner who understands the risks and exposures of their business, how to mitigate those risks, and is willing to optimize the profitability of the program. Any role or function that is deemed "secret sauce" is an in-house seat.

The functions of the MGA that appear to be incidental, supportive, or situationally relevant could be great candidates for outsourcing. A few examples of this include licensing a reputable policy administration platform that has more experience supporting regulated insurance products, as opposed to a homegrown PAS. Product development, actuarial studies, filing, compliance and licensing work, and legal counsel are great candidates for retainer or engagement model support.

One potential meaningful differentiator that can support scale in early and fast-growing companies is the use of a BPO to support many of the day-to-day functional seats that exist in an MGA. BPOs have navigated setting up user workflows, handling customer care, routing and handling payment-related issues, and claims routing. This is a function that can be particularly useful for startups with limited capital to support their scale. BPOs can grow and retract with your business.

Jeff, you brought a utilization-based commercial auto product to market. What did that teach you about getting a new kind of product past regulators and carriers?

Jeff Breault: For background, the product was an admitted long-haul trucking program rated on mileage from telematics data, with a rate that adjusted in-term as driver safety behavior changed.

What this taught me about engaging capacity is that a challenged line doesn't rule out carrier support; an unsupported reason to enter it does. In trucking, which has struggled with loss performance for years, we gave carriers a specific mechanism for improving results, with rates tied to live driver behavior, and that was the reason they said yes.

Regulators were receptive because of the approach I still use at Sproutr: explain the unusual concept succinctly, anticipate the questions examiners will ask, and give them what they need to approve rather than object up front.

The biggest lesson I took away from this is that capacity support and regulatory approval are important gates, but not the only ones. Bringing something novel to market required solving many other problems; in my case, this included automated monthly decisions on recalculating premium, notifying insureds of rate changes, and endorsing policies compliantly. Having clear answers for that full lifecycle demonstrates to your capacity that you understand the product, shows regulators you can administer it, gives distribution something they can explain, and gives internal tech teams a clear build direction to launch as quickly as possible.

With carriers and fronts looking harder at MGAs, what are they asking program builders to prove now that they weren't a few years ago?

JoAnne Artesani: There has always been a preference for existing revenue to seed a program. Demonstrating this now is a real bar. Put yourself in the carrier's seat. The cost for the carrier, measured in human hours, to onboard a program is meaningfully the same. The carrier considers what return on their time and resources they will receive if onboarding a program with in-force premium to seed the program compared with a new venture starting from $0. This is the reality. Demonstrate demand, secure your commitments, and be ready to produce.

What's one program design mistake that looks fine at launch and causes real pain two or three years in?

JoAnne Artesani: Broadly speaking, for admitted programs, getting too fancy with unproven and untested insurance product forms, or a rate plan that is built too rigidly, preventing you from reacting to changes in the market cycle or your intended buyer. You will learn things about your program only after you launch. Creating a product that doesn't resonate, so that you have to refile your rates, rules or forms, is a very expensive mistake that looks novel at launch and will cost you real money. Even for non-admitted products, the distribution and operational burden of re-educating your distribution, and sending conditional notice of renewal due to material changes, creates more questions than it answers.

The takeaway

Two lines stuck with me. JoAnne's "the carrier is giving you their pen" is the whole delegated-authority business in eight words. And Jeff's point that a tough line doesn't scare carriers off, an unsupported reason to enter it does, is the best answer I've heard to "why won't anyone back my program?" Show up with the product, the data, and in-force premium, and build the rate plan loose enough to fix what you'll inevitably get wrong.

Thanks to JoAnne Artesani, Founder and CEO, and Jeff Breault, CPCU, Head of Insurance, for taking the time. Learn more about Sproutr, and if you want more from JoAnne, listen to her Profiles in Risk episode on building an insurance program from first principles.