There are many different acronyms and terms that are thrown around in the insurance industry. If you are not familiar with what some call the ‘secret language’ that agents and brokers use, you may find yourself completely confused after speaking with an insurance professional. One of those acronyms is ‘MGA’ which is short for ‘Managing General Agent’. If you have ever heard this term, but are not quite sure what it means, keep reading.
According to IRMI.com an MGA (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 insurance carrier. Managing general agents generally provide underwriting and administrative services, such as policy issuance, on behalf of the insurance carriers they represent. These arrangements are most commonly found in the surplus lines marketplace. Typically, MGAs market more unusual coverage, such as professional liability, for which specialized expertise is required to underwrite the policies. MGAs benefit insurers because such expertise is not always available within the company and would be more costly to develop on an in-house basis. MGAs are often hired by insurance companies to manage their business in a specific territory. It is important to keep in mind, MGAs (sometimes referred to as wholesalers) do not compete with brokers and do not deal with clients. Instead, they are authorized to supply brokers with products to pass on to their clients. MGAs may also be a Surplus Lines Broker who is licensed to do business with non-admitted carriers, but does not have binding authority from the insurance carrier.
For more information on MGAs and other insurance related topics, visit our sources: http://www.aamga.org/education/ens2; www.irmi.com
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