Managing General Agent

By Lia Kopin-Green
/
July 4, 2022

What is a Managing General Agent?

A managing general agent, or MGA, is a specialized type of insurance agent that has binding underwriting authority from an insurer. MGAs act on behalf of insurers, working closely with insureds to address their coverage needs. Managing general agents perform certain functions normally performed only by insurers, including appointing retail agents and settling claims as well as binding coverage, pricing and underwriting.

Key Takeaways

  • A managing general agent, also known as an MGA, is an insurance agent vested with underwriting authority from an insurer.
  • MGAs are responsible for administering programs and negotiating contracts for insurers.
  • According to the International Risk Management Institute (IRMI), insurers benefit from working with MGAs since they provide the expertise that the company does not typically possess in-house, and which would be costly for them to acquire on their own.
  • Due to the advancement of modern communication technologies, the role of managing general agents has become less popular, but is beginning to regain prominence due to its various advantages.

Role of a Managing General Agent

A managing general agent’s contract with the insurer defines his or her specific duties, but generally, these tasks are often performed by MGAs:

  • Underwrite policies
  • Issue policies and bind various types of coverage
  • Apply endorsements to policies
  • Resolve claims
  • Negotiate commissions
  • Collect policy premiums
  • Ensure policies adhere to state and federal regulations

Coverage Fields

Some MGAs become specialists in a particular area of coverage and are able to provide personalized guidance regarding certain types of insurance policies. For instance, some managing general agents are experts in specific fields such as medical malpractice or defense costs. Companies seeking to add new insurance coverage types may consult a specialized managing general agent to help them develop additional policies.

Location Specialties

It is also possible to use MGAs to target specific geographic locations. In some geographically isolated areas where insurers do not want to establish branch offices (such as in western Oklahoma or northern Nevada), MGAs may work to provide coverage outside of the insurer's local network.

The Future of Managing General Agents

Although some MGAs are still used for geographic reasons, modern technology and the Internet have made it much simpler for insurers to work directly with clients from all over the United States. Therefore, the amount of active MGAs has experienced a slight decline. However, according to various insurance experts, we may once again see a rise in the use of managing general agents. This is due to the fact that as smaller parties that act on behalf of larger carriers, MGAs are also better suited to respond to market changes than typical larger insurance companies. Simply put, by using MGAs, insurance companies are able to navigate difficult market periods while decreasing their costs and increasing their profitability.

Bottom Line

As the insurance market continues to evolve, it is important to recognize the importance of general agents. By providing specialized expertise in niche industries, they can assist both the insured and the insurer in finding the efficient and cost-effective solutions.

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