What is an MGA in Insurance? I Lightico (2024)

By Lightico Marketing Team

What is an MGA in insurance? Insurance MGA’s, or Managing General Agents, perform many tasks that typical insurance companies normally handle. These tasks can include binding coverage, underwriting, settling claims, and appointing retail agents in a certain region.The MGA business model has been around for many years, and it's a popular choice for insurers who want to enter the casualty markets. But what is an MGA, and how can it be helpful to an insurance company? In this blog post, we will discuss the MGA business model and explain the differences between an MGA and a broker. We'll also answer some common questions about MGA's, such as who can become one and what services they offer.

What is an insurance MGA?

An MGA is an agent that works directly with the insurer. They are not employed by the insurer, but rather work independently. An MGA typically acts as a middleman between the insurer and the insured. For example, if you have a car accident, your MGA would contact the insurer on your behalf to handle any claims. This allows you to focus on getting better health care and recovering from your injuries.MGA's usually charge a commission fee based on the number of premiums collected. However, there are some exceptions. Some carriers do not pay commissions at all. Others only pay a flat rate per policy sold. And still, others use a combination of these models.

How does an MGA differ from a traditional broker?

A traditional or wholesale broker represents both the insurer and the insured (or client). Brokers often receive a commission for selling insurance products. If an MGA sells a policy, however, they do not get paid a commission. Instead, they are compensated through their own brokerage firm.MGAs tend to specialize in certain types of insurance. For instance, most MGAs focus exclusively on personal auto coverage. Other types of insurance, like commercial property, life, and workers' compensation, are generally handled by brokers.MGAs also tend to sell more expensive insurance products. A typical MGA might sell higher-priced homeowner's insurance than a traditional broker.

Who can become an MGA?

There are two main ways to become an MGA:

1) Through Apprenticeship2) Through Licensing - apprenticeships allow people to learn the ins and outs of the insurance business without having to pass exams. Licensing requires passing exams and meeting specific requirements.The exam process varies depending on the state where you live. Check with your local state insurance department to find out which type of license is required to practice as an MGA.The following states require licensure: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and Guam.The following states require no licensing: Alaska, Arizona, Arkansas, Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nevada, New Hampshire, New Mexico, New York State, North Dakota, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

What are the advantages of becoming an MGA?

1. Knowledge - Most MGAs have years of experience working within the insurance industry. As such, they have a competitive advantage, since they know what it takes to succeed in this field.
2. Specialization - Many MGAs specialize in one particular area of insurance, whether it is the life/annuity, private health insurance, or the casualty market. By having a specialized type, they gain valuable insight into the ins and outs of that market. This allows them to better serve clients.
3. Experience - MGAs have worked in the insurance industry for many years. They understand how the business works and what is needed to make money.
4. Flexibility - MGAs are independent agents; they work independently from the insurance carriers. This means that they can choose which carriers to represent and which ones to avoid.
5. Independence - As an independent agent, MGAs are not employees of the insurance company. They are free to negotiate rates and terms directly with their customers.
6. Access - MGAs often get access to special discounts offered by insurance carriers. These discounts can save consumers thousands of dollars over time.
7. Relationships - MGAs build relationships with insurance carriers that provide a competitive advantage to both parties. For example, insurance carriers will give MGAs access to products that they wouldn't otherwise offer. In return, MGAs help insurance carriers sell more policies.
8. Marketing - MGAs often use their expertise to develop innovative marketing strategies. They understand what types of promotions will attract new clients and keep current clients coming back.
9. Reputation - The reputation of an MGA speaks volumes about his or her ability to do business. A good reputation can lead to repeat business and referrals.
10. Time - MGAs don't need to spend hours on end answering phones and taking orders. Instead, they can focus on building relationships with their clients.
11. Money - Becoming an MGA doesn't cost much money. All you need is a computer and some basic office equipment.
12. Career Growth - Becoming an MCA requires little training. However, there is always room for growth as the MCA becomes more experienced.
13. Job Security - Insurance carriers typically hire only those people whom they believe will stay with the company for a long period of time. This gives MGAs job security.
14. Professional Development - MGAs learn something new every day. It's important to continually update your skills so that you remain competitive.
15. Compensation - MGAs usually earn a commission based on the amount of business they generate. Some companies pay commissions at different levels depending on the type of policy sold.

What Services Does an MGA Offer?

MGAs perform various services for insurance carriers. These often include:

1. Underwriting - An MGA reviews applications to determine whether they meet the requirements of the insurance carrier. If they pass muster, they then negotiate the terms of the contract.
2. Pricing - Once an application passes underwriting and has been approved, the MGA negotiates the premium rate. He or she does this by comparing the proposed premiums to similar policies already written by the insurer.
3. Administration - MGAs are responsible for managing the daily operations of the agency. This includes keeping track of all paperwork, paying bills, scheduling appointments, and handling customer complaints.
4. Sales - MGAs sell insurance policies to individuals and businesses. They may also sell annuities and life insurance.
5. Customer Service - MGAs must answer questions from prospective customers and handle any problems that arise.
6. Training - MGAs train others within the agency. They teach new hires how to sell insurance and how to run the agency efficiently.
7. Research - MGAs research new products and trends to ensure that they're offering the best possible coverage.
8. Negotiating Contracts - MGAs negotiate contracts with insurance carriers. They work out all of the details of the agreement including rates, fees, and renewal dates.
9. Advertising - MGAs create advertising campaigns designed to draw attention to their agency. They may also design logos and brochures.
10. Marketing - MGAs plan promotional events such as seminars and open houses to attract new customers.

In conclusion, like so many other career options, becoming an MGA has its pros and cons. While becoming an MGA isn't easy, it definitely has its rewards! To learn more, read Managing General Agent vs. Managing General Underwriter.