An MGA, or managing general agent, is a wholesale insurance intermediary with the authority to accept placements from (and often to appoint) retail agents on behalf of an insurer. MGAs generally provide underwriting and administrative services for the insurers they represent.
The Role of MGAs
Insurance companies often hire MGAs to manage their business in a specific territory. Sometimes referred to as wholesalers, MGAs do not compete with brokers and do not deal with clients. Rather, they are authorized to supply brokers with products.
MGA Specialty Knowledge
MGAs usually market more unusual types of insurance coverage, for which specialized knowledge is required to underwrite policies. Insurers collaborate with MGAs because such expertise is not always available in-house and would be more costly to develop within the company.
Types of MGA
An MGA can be used in any line of insurance for any form of insurer. According to the American Association of Managing General Agents, this includes insurers who are "admitted or not, direct or otherwise, broker or agent system, contract/appoint or open-broker subproduction, or any or all combination of these."
MGA Compensation Methods
MGAs are generally entitled to a contingency commission, or override, on all business written within their territory. They will take a percentage of the commission that would otherwise go to the producing insurance agent.
Challenges for MGAs
Being an MGA involves personal accountability as well as responsibility for producers. MGAs take on the significant costs involved in being a wholesaler and the investment needed to succeed. They must function in many capacities including recruiting, training and motivating. They also must maintain their personal practice.
- Photo Credit Bartłomiej Szewczyk/iStock/Getty Images
Admitted vs. Non-admitted Insurance Company
Insurance companies can be designated as either admitted or non-admitted. The difference is insurance companies under one classification are required to follow...
What Is a Managing General Insurance Agent?
Insurance companies hire managing general agents (or MGAs) to act on their behalf in particular states or territories. They get selected on...
Definition of a Wholesale Insurance Broker
Retail insurance agents meet countless clients and prospective clients regularly. Even independently licensed agents are often unable to extend their resources beyond...
Definition of a Cover Holder of Insurance
In the United Kingdom, insurers enter into agreements with coverholders. These brokers act as agents for insurers, writing insurance contracts on their...
What Does DBA Mean in Business?
A DBA is a name an individual or business entity uses to conduct business. Some states require a DBA for some businesses...