What Is MGA Insurance?

by Fraser Sherman - Updated July 10, 2018
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MGA insurance is coverage you buy from a managing general agent. A traditional insurance agent works like a retailer: They sell policies, but they don't underwrite them or set the insurer's prices. An MGA handles underwriting, pricing, settling claims and other functions on behalf of particular insurance companies.


  • Managing general agents sell, price and underwrite policies for insurance carriers. Many MGAs have expertise in specialized fields where they know the risks better than carriers do.

What's an MGA?

MGAs are typically specialists. To turn a profit, insurers have to know how much risk they're facing when they write a policy. Companies can become experts on risk in a particular field – medical malpractice, cruise ship liability – but it's hard to have expertise in every possible line of insurance. An insurer may want to branch out into a new field, such as assisted-living insurance, but that's a big gamble if it doesn't know the risks.

Enter the managing general agent. MGAs offer insurers expertise in different specialized fields. Insurers give MGAs the authority to underwrite and issue specialty policies because they know the risks. The insurer trusts an MGA to judge the risks tied to a particular policy and set premiums accordingly. Some MGAs are specialists in particular regions. An insurance company may not think a small town or rural area offers enough income to justify opening a branch office. Working with an MGA who is based in the area gives the company access to customers without having to pay for staffing or rent.

Starting an MGA Career

Other MGAs are startups without the cash reserves to meet state regulatory requirements. The MGA partners with an insurance carrier that provides the reserves. When the MGA sells policies, the carrier takes a cut of the profits, but assumes as little of the insurance risk as possible. Instead, the MGA risks most of the losses.

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MGAs Sell Insurance Wholesale

A managing general agent can sell insurance retail or as a wholesale brokerage firm. A retail brokerage deals directly with customers who want to buy insurance. Wholesale brokers act as intermediaries for retail agents. The retail agent contacts the MGA about providing a client with insurance coverage, and the MGA handles the underwriting on behalf of the insurance carrier. Like insurers, retail agents benefit from the MGA's specialized expertise. An MGA can do both wholesale and retail work, selling policies directly and also dealing with other agents, depending on the MGA's expertise and interests.

MGAs Face Challenges

Becoming an MGA can be profitable, but it comes with a special set of challenges. Insurers who do business with an MGA vest the agent with a lot of decision-making power. If the MGA isn't up to the job, that's going to cost the carrier money. A rookie MGA has to prove he has the judgment and knowledge to underwrite successfully. MFAs also face a higher level of risk than regular agents.

About the Author

Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs.

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