How to build a successful MGA - Insurance Post (2024)

FAQs

How to build an MGA? ›

Formulate a comprehensive and effective business strategy. Define the objectives of the enterprise clearly. Ideally, this includes the office location, number of employees needed, target clients, marketing approach and competitors. Conduct extensive research and analysis regarding the overall plan.

Document your idea, the value you are bringing and why you think it works as an MGA. Create a financial model to see whether it stacks up and test your assumptions with experienced people in the industry. Go and talk to capacity providers and see what appetite there is for your plan.

Compensation - MGAs usually earn a commission based on the amount of business they generate.

Like an insurance carrier, an MGA underwrites policies. But unlike carriers, who hire and contract with agents to sell policies, MGAs quote and bind the policies they underwrite. They can do so because carriers have granted them more authority than granted to other agents.

In other words, an MGA acts—in a limited way—as an underwriter. The contract between the MGA and the insurer spells out its specific duties, but generally MGAs perform some or all of the following tasks: Bind coverage and issue policies. Process endorsem*nts to existing policies. Underwrite and price policies.

Put simply — although it is not always all this simple — an MGA is an agent that manages an insurer's business, produces and underwrites a certain amount of the insurer's business, and either adjusts/pays a certain amount of the insurer's claims or negotiates reinsurance on the insurer's behalf.

A Managing General Agent (MGA) is an agency that is contracted to perform various business functions, such as underwriting, binding, policy administration, claims, and distribution, on behalf of (re)insurance companies.

The MGA market in North America continued to accelerate during 2023, experiencing a 24% growth from $71 billion to $88 billion, representing approximately 11% of the overall Property and Casualty (P&C) market (based on Gallagher's latest projections).

Conning estimates that the total U.S. MGA market, including business written for the account of Lloyd's syndicates, exceeded $85 billion in direct premiums written in 2022. Growth was supported by: a continuing migration of talent from insurers and brokers to MGAs.

Benefits of using an MGA include flexibility in creating custom policies, local market expertise, and personalized customer service. However, potential risks include unregulated markets, financial instability, and reputational damage.

What are the benefits of MGAs? ›

MGAs offer several benefits to insurers, including access to specialised expertise, cost savings, and expanded distribution channels. By partnering with MGAs, insurers can leverage their underwriting and risk assessment expertise to improve the accuracy and efficiency of their operations.

On top of that, the MGA is responsible for paying out claims and handling other administrative tasks. So, if something goes wrong, you know that the MGA will take care of it.

By contrast, there are around 600 MGAs in the United States, meaning that the primary investment thesis needs to be different. While retail brokers may have similar customers or risk needs, these will vary significantly among MGAs.

Often times a particular Lloyd's program is insured by several syndicates. Managing Agent: They work on behalf of syndicates, overseeing day-to-day business affairs. Managing Agents select and oversee Coverholders.

This description undoubtedly makes a program administrator seem like an MGA, or, managing general agent, but the subtle difference between the two is that an MGA usually does not possess the authority or underwriting capability of a program administrator.

The primary distinction between MGAs and MGUs lies in their scope of authority. MGAs are generally granted broader powers, encompassing: Underwriting: Assessing risks and setting premiums for insurance policies. Marketing and Sales: Promoting and selling insurance products to brokers and agents.

Managing general agency/managing general agent (MGA) and managing general underwriter (MGU) – these two terms frequently spur confusion in the industry, even by those who profess to be one or the other.

PoloWorks has unveiled Polo MGA, a new managing general agent (MGA) incubator. According to a news release, the new offering provides support spanning from inception to expansion, and, in select cases, backed by investments from PoloWorks where the business proposition aligns with Polo's investment criteria.