What Is An MGA In Insurance & Why Use One?

In the insurance industry, there are many different types of agents, brokers and companies you can choose from to help design a policy to fit your client’s needs better or even to expand your clientele into new markets or industries. To get the most out of your experience, it is helpful to understand what an MGA is, who uses one and what benefits you can see.

Definition

MGA stands for Managing General Agent and sells wholesale insurance, specializing in specific industries or insurance products. These agents have the authority to negotiate prices and can help your agents find industry-specific coverage that you may struggle to cover elsewhere.

Because MGA insurance plans often cover unique risks and niche industries, the agent evaluates risks for pricing and can bind coverages, appoint retail agents and underwrite plans. A managing general agent will act as the carrier for transactions in many ways, allowing insurance companies the benefits of multiple regional offices without the overhead.

Working With An MGA

MGAs work as intermediaries between retail agents and insurance companies, not directly with clients. Retail agents can contact an MGA about niche risks and coverage and negotiate pricing on behalf of their clients. Working with an MGA will allow an agent to expand his or her market share by opening up to clients in different industries or who need customizable coverage. Because an MGA can act as the provider in various situations, you will be able to streamline processes like underwriting and price negotiations.

Benefits

In addition to the benefits MGAs offer insurance providers, local agents can also benefit from working with this type of professional because they tend to have broader portfolios, allowing agents access to niche plans and industry-specific coverage for their clients. Because MGAs have underwriting authority, retail agents can benefit from a simplified process and customized plans.

For retail agents, working with an MGA offers more flexibility and customization for their clients, especially those facing niche risks or working in difficult-to-insure industries. This allows agents to expand to more clients while providing flexible and customizable plans and streamlining the underwriting process.

Things To Watch For

It is important not to confuse wholesale insurance brokers with MGAs because while the two positions overlap, a wholesale broker will have limitations that an MGA does not. Wholesale insurance brokers also act as intermediaries between agents and insurance companies, have broad portfolios with access to niche products, and can help customize plans for retail agents to offer clients; however, they do not have underwriting authority and cannot negotiate pricing or evaluate risks for the provider. This way, the customization available to wholesale brokers is less than that MGAs can use. Conversely, an MGA usually only works with one insurance provider, while wholesale brokers can offer various products from multiple providers.

An MGA works as an intermediary between insurance providers and retail agents to help provide flexible and customizable coverage options. This is particularly useful for niche risks and industry-specific coverages. You can find an MGA specializing in the industries in your portfolio or even use this agent to expand into additional markets with more clients and greater flexibility.