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