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The Role of an MGA in Insurance

What does MGA stand for? An MGA, or a managing general agent, is an intermediary that acts on an insurance companies' behalf to perform underwriting, selling policies, and claims.

See our MGA/Programs coverage >

What does MGA stand for in insurance?

MGA stands for Managing General Agent. An MGA is an individual or company that acts as an agent for an insurance company (known as the insurer or carrier). A managing general agent operates under a contract with the insurer to perform various administrative functions, and they also work as intermediaries between the insurers and insurance agents/brokers.

What is an MGA?

So, what is a managing general agent, and what are their responsibilities? An MGA is an intermediary for insurers. This is an individual or company an insurer authorizes to act on its behalf as an agent distributing, selling, and servicing certain insurance products.

As an insurance company, you authorize them to underwrite policies and issue them to clients directly. Aside from underwriting policies, MGAs also help market an insurer's products. They have expertise in venturing into new markets and getting new customers.

With the help of an MGA, insurance companies don't have to set up infrastructure to access new markets. Moreover, MGAs sometimes handle the initial processing and settlement of claims on policies they underwrite on the insurer's behalf.

MGAs manage the insurer's risk exposure by monitoring account performance and pass that information back to the insurer. They are licensed by state insurance regulators to operate and comply with regulations like industry best practices.

In a nutshell, MGAs are key players in insurance by helping reach new markets by creating new insurance products.

a close-up of an insurance professionals holding a pen

What do Managing General Agents do?

They may have many roles, but what is a managing general agency, and what are their primary responsibilities? Managing general agents are specialized insurance intermediaries that work with multiple insurance carriers to provide underwriting services. By focusing on niche commercial insurance lines, they develop expertise to efficiently assess specialized risks and build portfolios tailored for the insurers. The following are the key responsibilities of MGAs.

Underwriting: MGAs are responsible for underwriting insurance policies on behalf of the insurer. When insurers give MGAs the power to underwrite, it opens doors to expanding their reach.

They use their specialized expertise to carefully assess each application for insurance coverage. MGAs also utiize the underwriting authority to accept straightforward risks that meet guidelines or decline those deemed too risky.

Pricing: When underwriting insurance applications, a managing general agent is responsible for pricing and premiums charged to policyholders for the coverage provided. Using their expertise in risk assessment and market trends, they analyze the nature of the business, loss data, limits required, and deductibles to determine the appropriate rates. Additionally, they negotiate the premium rates using other policies from the same insurer.

Policy Administration: MGAs assume extensive ongoing administrative duties as liaisons between insurers and policyholders. After underwriting coverage, they generate and deliver complete policy packages outlining terms, coverage periods, premiums, and necessary notices.

MGAs then track renewal timelines to provide updated quotes and collect payments. They efficiently process common requests like changes, cancellations, and reinstatements. If a claim arises, MGAs sometimes initiate intake and management of initial reports.

Their administrative duties include handling customer complaints and scheduling appointments. Through centralized customer service and document handling, MGAs effectively lighten the servicing burden for carriers. Their administration streamlines policy maintenance from contract inception through the lifespan of each account.

Claims Management: As a middle person between the insurer and the insured, a managing general agent plays an essential role in the claims process on behalf of insurers. When a policyholder files a new claim, the MGA is the first point of contact to gather initial details and start a file.

When your company works with an MGA, they oversee the assignment to an appropriate claims adjuster and monitor their work. MGAs ensure adjusters follow established procedures for investigating liability and damages and issuing settlements if the claim is covered.

For complex claims, they may step in to handle negotiations directly. MGAs also process payments and pursue subrogation if possible. Through vigilant oversight of adjusters and hands-on management of complex cases, MGAs efficiently help insurers resolve claims within delegated authority.

For instance, if a construction company files a claim for damaged equipment in an accident, an MGA works with loss estimates and engineers to determine the scope of the damage. An MGA steps in to negotiate complex claims on behalf of the insurer and helps with loss control.

Binding Cover: With their expertise and authorities granted by insurers, MGAs evaluate risks and bind coverage for suitable applicants. After thoroughly assessing each submission based on established criteria, MGAs make independent decisions on acceptability within their binding limits.

They immediately issue binders confirming practical terms and dates for standard risks that meet guidelines. For straightforward cases that meet the criteria, MGAs may immediately issue a binder confirming coverage terms and conditions. However, for cases near the binding threshold, MGAs consult carriers before binding.

Managing general agents’ proficiency in expediently producing binders readies insurers to assume risk and service customer demand in specialized markets. Binding duties let MGAs swiftly capture profitable opportunities, serving as a critical front-line commitment for insurers.

A close up of a stamp on an MGA professional's table

How do insurance companies benefit from working with an MGA?

What is an MGA company in insurance? An MGA (managing general agent) company is a type of business that acts as an intermediary between insurance carriers and policyholders. Insurance companies benefit in the following ways by working with an MGA company:

  • Specialized expertise
    MGAs focus on niche commercial lines and develop deep knowledge.

  • Local market knowledge
    Many MGAs have a local or regional presence and better understand specific geographies.

  • Timely service
    As delegated underwriters, MGAs can often provide real-time quotes, binding, and quicker claims responses.

  • Single point of contact
    MGAs manage the entire insurance lifecycle, providing one consistent relationship manager.

  • Competitive pricing
    Close MGA-insurer partnerships promote negotiating leverage for competitive premium rates.

  • Underwriting authority
    MGAs can directly accept many standard risks without requiring insurer pre-approval delays.

  • Specialized resources
    Brokers have a broader focus, while MGAs invest dedicated resources into niche segments.

Unlock New Insights with Insurance Insider US

MGAs are essential to the insurance ecosystem, serving as intermediaries between insurers and clients. Looking for more in-depth information on MGAs, insurance updates, and industry news and trends?

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