First and foremost: What is an MGA?
MGA stands for managing general agent, an independent entity with specialized expertise authorized by insurance carriers to underwrite and manage insurance policies on their behalf. Essentially, MGAs serve as a liaison between carriers and agents, or directly with policyholders. For example, when a policyholder reports a claim, they might work with an MGA who then communicates with the insurance carrier for them.
So how is that different from a regular insurance agent—what makes MGA insurance unique? For starters, MGAs can perform additional services that would typically be conducted by insurance carriers; binding coverage, underwriting, and settling claims just to name a few. Because they have special relationships with their carrier partners, MGAs can act on behalf of said carriers within certain risk parameters. This can make working with an MGA much smoother, as they have the flexibility and autonomy to make decisions rather than going back and forth between claimants and carriers. Plus, the generally smaller size of MGA teams results in quicker, more personalized services.
The flexibility and autonomy that MGAs boast is an important part of their presence in the industry. With insurance growing more complex from a risk and regulatory standpoint, carriers are looking to MGAs as a more viable option for meeting customer needs. The other aspect that makes MGA insurance so compelling is their ability to service niche sectors that carriers may not typically reach. This expands carrier business and offers more insurance options for agents and policyholders—a win-win. Let’s take a closer look at what MGAs offer to the industry as a whole.
How MGAs fit in the industry
Think of MGAs as an intermediary between two parties: insurance carriers on one side, and independent insurance agents on the other. With extensive experience in underwriting, policy issuance, and claims handling, they can provide carriers with a channel for new business while also enabling independent or retail agents to better support their customers.
When it comes to the carrier side of things, MGAs offer specialized expertise across a bevy of niche markets such as cyber security, drones, and flooding to name a few. They can help bridge the gap between a carrier and its target customers or provide entry into a space without the carrier needing to develop its own infrastructure to research and launch new products. With carriers limiting their risk appetites in recent years in favor of greater stability, MGAs have become more desirable than ever as a way to counter hard markets. In a similar vein, MGAs can better assess unique risks and develop policies that carriers are willing to take on but still appeal to independent agents and prospective policyholders.
But what is MGA insurance offering that stands out to the other side of the equation, namely agents and the insured?
- Experienced staff with extensive knowledge of niche markets
- Faster service in policy issuance and claim processing
- Wider array of insurance products and services
These factors are just a few of many that distinguish MGAs as a strategic partner for carriers, a compelling option for agents to place new business, and policyholders to get the insurance coverage they need. Their unique authority lets them offer smoother experiences without sacrificing the quality of insurance options.
Why are MGAs growing more popular?
Traditional insurance carriers are facing financial hurdles with diminishing returns due to escalating operational and loss costs and a shift away from certain risks that have become unfavorable or less predictable over time. Yet, while much of the industry has experienced these challenges, MGAs have recorded significant growth in recent years as their expertise and flexibility help them target growing and emerging markets.
MGAs also strategically build retail agent partnerships to reach policyholders that may not get the coverage, products, or services they need from traditional carriers. And because they typically have highly profitable track records, they are becoming an increasingly popular partner for carriers looking to expand into new sectors and hedge against thinner margins.
The lean structure of the MGA business model also lends itself toward consistent, more reliable growth, and MGAs have made a point to embrace technology as a way of boosting efficiency. Comprehensive MGA management systems are becoming more common among top MGAs in addition to tools that assist both their internal teams and their clients by providing faster processes over outdated, legacy systems. These powerful MGA solutions help power their services and enable them to be more efficient while maintaining lower operational costs.
Effective MGAs utilize smart solutions
What makes MGA insurance such an appealing option is their speed and flexibility in an increasingly complex industry. These characteristics are key selling points for MGAs, and critical for continued growth and success.
One way that MGAs succeed is through technological integration. They are known for embracing solutions that enhance their infrastructure and empower their smaller teams. Due to their unique niches, MGAs need a certain degree of customization to fit their needs.
All that and more may be why 86% of U.S. MGAs leverage Vertafore solutions for improving agency management, market connectivity, carrier collaboration, and retail agent experience. And with Vertafore’s recent acquisition of Surefyre, we’ve reinforced our position as the leading technology provider for MGAs.
Explore more about our MGA solutions and learn how Vertafore can power your possible.