What Is MGA Insurance?

by Jan Hill; Updated September 26, 2017
Business meeting

An MGA, or 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 insurer. MGAs generally provide underwriting and administrative services for the insurers they represent.

The Role of MGAs

Insurance companies often hire MGAs to manage their business in a specific territory. Sometimes referred to as wholesalers, MGAs do not compete with brokers and do not deal with clients. Rather, they are authorized to supply brokers with products.

MGA Specialty Knowledge

MGAs usually market more unusual types of insurance coverage, for which specialized knowledge is required to underwrite policies. Insurers collaborate with MGAs because such expertise is not always available in-house and would be more costly to develop within the company.

Types of MGA

An MGA can be used in any line of insurance for any form of insurer. According to the American Association of Managing General Agents, this includes insurers who are "admitted or not, direct or otherwise, broker or agent system, contract/appoint or open-broker subproduction, or any or all combination of these."

MGA Compensation Methods

MGAs are generally entitled to a contingency commission, or override, on all business written within their territory. They will take a percentage of the commission that would otherwise go to the producing insurance agent.

Challenges for MGAs

Being an MGA involves personal accountability as well as responsibility for producers. MGAs take on the significant costs involved in being a wholesaler and the investment needed to succeed. They must function in many capacities including recruiting, training and motivating. They also must maintain their personal practice.

About the Author

Jan Hill is a certified paralegal. She has a bachelor's degree in English and journalism, and has been writing for more than 30 years. Her work has been published in a variety of venues, including "The Warrior," the official publication of Trial Lawyer's College, ExpertHub.com, and her local daily newspaper, "The Rapid City Journal."

Photo Credits

  • BartÅ‚omiej Szewczyk/iStock/Getty Images