Managing General Agent: Everything You Need to Know

A managing general agent (MGA) is a business entity that acts as an intermediary between an insurer and other insurance companies, helping to facilitate the placement of insurance risks.

MGAs are typically licensed to operate in multiple states, which allows them to work with a wide range of clients and insurance companies.

One of the key benefits of working with an MGA is that they can provide access to a broader range of insurance products and services than an individual insurance company might offer.

An MGA's primary goal is to help their clients find the best insurance solutions for their needs, while also providing administrative support and expertise to the insurance companies they work with.

An MGA, or managing general agent, is an individual or company authorized by an insurer to act on its behalf as an agent distributing, selling, and servicing certain insurance products.

They are given more authority than a typical agent, and their responsibilities include tasks typically carried out by insurers such as binding coverage, underwriting, settling claims, and negotiating contracts.

An MGA is essentially a middleman between the insurer and the client, helping market the insurer's products and sometimes handling the initial processing and settlement of claims on policies they underwrite on the insurer's behalf.

They operate under pre-agreed terms as per their annual contract and are licensed by state insurance regulators to comply with regulations and industry best practices.

To be considered an MGA, an organization must not be legally part of the insurer but work with them in a way that puts them on the hook for underwriting and paying out insurance contracts.

An MGA, or managing general agent, is an individual or company authorized by an insurer to act on its behalf as an agent distributing, selling, and servicing certain insurance products.

To be an MGA, you must serve as an insurance agent or broker and have the authority to underwrite insurance contracts on behalf of a carrier or carriers. This means you'll be handling tasks typically carried out by insurers, such as binding coverage, underwriting, settling claims, and negotiating contracts.

MGAs operate under a contract with the insurer, which gives them a level of autonomy to make decisions on behalf of the carrier. This can include underwriting policies, issuing them to clients directly, and helping to market the insurer's products.

In fact, MGAs are often set up to handle the initial processing and settlement of claims on policies they underwrite on the insurer's behalf. This can be a more cost-effective way for an insurer to access new clients and business, without having to set up infrastructure to access new markets.

To be considered an MGA, your organization must meet certain criteria, including being a separate entity from the insurer, handling the total insurance business, including underwriting, and producing and underwriting at least 5 percent of the policyholder surplus.

Ultimately, the key to determining if you're an MGA is to look at how you're regulated, not what you call yourself. The NAIC's MGA Act is a good resource to help you understand whether your organization meets the MGA standard.

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An MGA (Managing General Agent) operates in the middle of the insurance distribution channel, between the insurer and the agent or customer. They work with insurers to formulate products that are then delivered to agents or directly to insureds.

MGAs can also be responsible for communicating with clients and attending to their needs. This includes providing sales and marketing support, as well as the advantage of online platforms and automated solutions and tools that can help streamline things like claims processing and renewals.

In a two-circle Venn diagram, the overlap where underwriting and recruiting downstream sales funnels live is where MGAs are in the insurance distribution channel. This is where they help insurers reach new markets via differentiated insurance products.

Here's a breakdown of the different roles in the insurance distribution channel, with MGAs falling in the middle:

By working with an MGA, insurance companies can benefit from their specialized expertise, local market knowledge, and ability to provide timely service to customers.

MGAs can be individuals or companies, and they operate under a contract with an insurer to perform various administrative functions.

There are different types of MGAs, but let's start with the basics. An MGA can be a company or an individual authorized by an insurer to act on its behalf as an agent.

Some MGAs specialize in underwriting policies and issuing them to clients directly. This is a key responsibility of an MGA, and it allows insurers to access new markets without having to set up their own infrastructure.

MGAs often have unique distribution and expertise in venturing into new markets and getting new customers. This can be a cost-effective way for an insurer to access new clients and business.

In addition to underwriting policies, MGAs may also handle the initial processing and settlement of claims on policies they underwrite on the insurer's behalf. This is another important responsibility of an MGA.

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MGAs manage the insurer's risk exposure by monitoring account performance and passing that information back to the insurer. They operate under pre-agreed terms as per their annual contract.

MGAs are licensed by state insurance regulators to operate and comply with regulations like industry best practices. This ensures that MGAs are held to the same standards as insurers.

The history of managing general agents (MGAs) in insurance is a fascinating one. MGAs arose as a result of the westward expansion in the United States, as insurance giants from the Northeast expanded their business services across the continent.

The Industrial Revolution and advances in communication technology enabled more collaboration between insurers and western states. This led to the creation of MGAs, which could build insurance policies specific to a region or demographic.

MGAs became a Petri dish of insurance, allowing for the testing and development of new policies and product types. This freedom led to many innovations in the industry, but also raised concerns about reinsurance requirements and regulatory oversight.

Today, MGAs fill two main roles: specialization and innovation. They help carriers offer more tailored insurance solutions to consumers with unique needs.

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The history of MGAs/MGUs in insurance is a fascinating story that spans the country's westward expansion. As businesses and commerce connected the East and West Coasts, insurance giants from the Northeast looked to expand their services across the continent.

The Industrial Revolution and advances in communication technology enabled more collaboration with western states, making it easier for insurers to reach new markets. This expansion led to the creation of MGAs/MGUs, organizations that could build insurance policies specific to a region or demographic.

Building a brand new insurance company and keeping cash reserves on hand is not cheap, so insurers developed MGAs/MGUs as a cost-effective solution. This allowed them to try out new policies and product types in a controlled environment.

As MGAs/MGUs formalized and became more common, they became a testing ground for new insurance innovations. Many successful policies and products were born out of this freedom to experiment.

MGAs and MGUs now fill two roles: one of specialization and one as the ongoing Petri dish. This allows them to provide tailored coverage for specific risks.

Consumers may not be aware that MGAs often fill the roles for more specialized insurance needs. These needs can't be met by general insurance policies.

MGAs can underwrite for the very specific risks of a circumstance or situation. This is especially true for businesses with unique needs, like golf courses.

Golf courses, for example, require coverage for golf carts that roll into ponds. This is a risk that's different from the hazards of the open road.

MGAs work exclusively with golf courses, providing coverage options that are backed by a few different carriers. This allows them to offer policies that are tailored to the business's specific needs.

MGAs have particular experiences and niche specialties that allow them to underwrite policies for unique situations. This is in contrast to buying an expansive policy that covers a lot of unnecessary situations.

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Working with a managing general agent (MGA) can bring numerous benefits to insurance companies. By partnering with an MGA, insurance companies can tap into specialized expertise and local market knowledge. MGAs often focus on niche commercial lines and develop deep knowledge, allowing them to provide more effective services to their clients.

MGAs can also provide timely service to customers, offering real-time quotes, binding, and quicker claims responses than the insurance company itself can. This is because MGAs can directly accept many standard risks without requiring insurer pre-approval delays. As delegated underwriters, MGAs can manage the entire insurance lifecycle with the customer, providing one consistent relationship manager.

Insurance companies benefit from working with an MGA in various ways, including specialized expertise, local market knowledge, timely service, single point of contact, and competitive pricing. By leveraging these benefits, insurance companies can improve their customer service and stay competitive in the market.

Here are some key advantages of working with an MGA:

Becoming an MGA also has its advantages. MGAs have years of experience working within the insurance industry, giving them a competitive advantage. They often specialize in one particular area of insurance, allowing them to gain valuable insight into that market. This specialization enables them to better serve clients and build strong relationships with insurance carriers.