Choosing the Right Managing General Agent (MGA) for Your Insurance Business: A Comprehensive Guide

How MGA fits into the distribution channel

Wholesale brokers act as intermediaries between retail brokers and insurance companies, and work with insurers to achieve specialized coverage for clients while not being involved. contact the insured. MGA is a type of wholesale broker and acts on behalf of insurance companies and works closely with clients to meet their needs. Another type of wholesaler is a surplus sugar broker who works with retailers and insurance companies to obtain coverage for the insured. What makes MGAs unique is their binding powers from the insurance company.

MGA will supply and service the carrier’s product to both insurers and customers. The MGA may work with several carriers to create a specific mix of products to offer to agents/brokers or directly to the insured.

How MGA benefits insurance companies and agents

Working with an MGA is beneficial for insurance companies because they have specialized knowledge that insurers may not have at their headquarters or regional offices and can be expensive to develop. internally, according to IRMI. Working with an MGA, companies can turn off time-consuming and complex tasks to an outside organization that already has the knowledge to tackle them.

MGAs tend to deal with insurance areas such as professional liability, employee benefits, or surplus areas that require specialized expertise to implement policies, although they can operate in any any insurance industry and work with all types of insurance companies. If an insurance company wants to explore a particular area of ​​business, but does not want to take the risk or uncertainty of doing so, it can turn to the MGA to provide that expertise and award. gives MGA the right to underwrite and issue expertise. because they are used to the risk.

MGAs can also write businesses in geographically isolated areas where insurance companies don’t want to open offices. A small town or rural area may not guarantee the opening of a branch for an insurance company, but working with the MGA in that area helps the company reach new customers without having to hire staff. or rent.

Similar to insurance companies, agents can gain expertise on a particular product or more competitive pricing by working with an MGA. They are also able to penetrate markets and service providers that can be difficult to access, and because the size of the MGA business is usually smaller, there are fewer barriers to communication for the broker. MGA also brings technology, such as online platforms that integrate with wholesale channels, or products that speed up the quote process, helping independent agents provide better service to their customers. surname. Agents can earn higher commissions by working with MGA which has a diverse network of service providers, allowing agents to review the commission structure and have the option of selling their products. Service provider offers the best price.

MGA around the world

Various MGA models were created during the 1990s and 2000s, although the role of the wholesale broker, a category to which the MGA belongs, dates back to the 19th century. The associations represent the MGA in different regions. Specific areas today include:

• General Agents Association (MGAA) in the UK, founded in 2011
• The American Association of General Managers (AAMGA), was founded in 1926 and has since merged with the National Association of Professional Surplus Offices (NAPSLO) to form the Association of Wholesale & Professional Underwriters. Specialization (WSIA)
• Canada Operating Agents General (CAMGA), a relatively new association formed in 2017
• Council of Underwriting Agencies (UAC), based in Australia and established in 1998

In Australia and New Zealand, the MGA is considered an underwriter, although they function similarly to a general regulator. EY revealed that these agents accounted for 13% of the brokerage market in Australia in 2016. According to UAC, its 116 members account for more than A$6 billion in premiums that Australian businesses and consumers spend. five.

In the UK, the term ‘MGA’ has been adopted by the market to refer to what was once called an ‘undertaker’. Today, more than 300 MGAs underwrite more than 10% of the overall premiums of the £47 billion general insurance market, according to the MGAA.

Worldwide, MGAs have become one of the fastest growing segments of the insurance industry. Global investment firm Conning reports that the MGA and growth program market continues to outpace property and casualty market growth, with direct premium growth 7% higher than year-over-year versus 5% seen in P/C market growth. The analysis also shows that 21 of the top 25 P/C insurers have a relationship with MGA.

The role of MGA today

With technology bridging the gap between insurers and customers today, some carriers are moving away from relying on MGAs, which has put the identity and future of MGAs in doubt.

Rekha Schipper, president of Tangram Insurance Services, said: “By virtue of their virtue, the MGU and the MGA, the program administrator, are the middlemen. “How can we make sure we stay ahead, make sure we take advantage and make sure we continue to be relevant and meaningful to a broker, an operator? transfer, a technology investor. between all of this? “

However, MGA is a natural outlet for technology solutions due to established distribution channels. These agencies can also react to market changes more quickly than conventional insurers because they are smaller businesses operating on behalf of larger insurers.

“We can bring programs to market faster. We can reach more brokers because they can access our platform. We are able to reduce our costs as an MGU because now we are automating a lot of things,” explains Schipper, adding that there is an “unprecedented opportunity” for the agency. partnership between technology providers and MGU.

During tough market times, insurers can use MGA to reduce costs and increase profits. The MGA model is also flexible. After the 2008 financial crisis, Ironshore, a Liberty Mutual company, established a joint underwriting agency as their commercial clients faced high risk due to the viability of some Insurers offering high coverage limits across many lines of business for large companies is uncertain. Meanwhile, brokerage firms are also under pressure to find alternative insurance solutions. The Ironshore MGU model deals with underwriting as well as claims management, the latter of which makes it unique from a traditional MGA, which may have limited powers of claims management and payment.

(Updated September 21, 2021)