{"id":13122,"date":"2018-06-11T15:30:00","date_gmt":"2018-06-11T19:30:00","guid":{"rendered":"https:\/\/www.resourcepro.com\/what-is-an-mga\/"},"modified":"2024-07-24T13:05:16","modified_gmt":"2024-07-24T17:05:16","slug":"what-is-an-mga","status":"publish","type":"post","link":"https:\/\/www.resourcepro.com\/blog\/what-is-an-mga\/","title":{"rendered":"What is an MGA?"},"content":{"rendered":"\r\n<p><em>Elaine is a Marketing Associate at ReSource Pro Compliance<\/em><\/p>\r\n\r\n\r\n\r\n<p>When I worked as a Compliance Coordinator, my most complex projects <s>usually<\/s> often began with the apparently simple statement, \u201cI want to get licensed as an MGA nationwide.\u201d\u00a0It wasn\u2019t that the folks on the other end of the call weren\u2019t wonderful people (they were) or that the licensing process for an MGA was that much more difficult than any other type of agency licensing (okay, it kind of is).\u00a0It was that so very few people I spoke with\u2014even experienced agency owners and producers\u2014met the regulatory definition of \u201cmanaging general agent.\u201d\u00a0It\u2019s a term that we use very broadly in the insurance industry on a day-to-day basis.\u00a0But the actual definition is very specific.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"h-what-is-an-mga\"><strong>What Is an MGA?<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>The\u00a0<a href=\"https:\/\/content.naic.org\/sites\/default\/files\/model-law-225.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">NAIC model regulation<\/a>\u00a0defines a managing general agent as \u201cany person who (1) manages all or part of the insurance business of an insurer (including the management of a separate division, department or underwriting office); and (2) acts as an agent for such insurer \u2026\u201d<\/p>\r\n\r\n\r\n\r\n<p>The exact wording of each state\u2019s MGA definition varies slightly, but the fundamental principle is the same.\u00a0In other words, an MGA acts\u2014in a limited way\u2014as an underwriter. The contract between the MGA and the insurer spells out its specific duties, but generally MGAs perform some or all of the following tasks:<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>Bind coverage and issue policies<\/li>\r\n\r\n\r\n\r\n<li>Process endorsements to existing policies<\/li>\r\n\r\n\r\n\r\n<li>\u00a0Underwrite and price policies<\/li>\r\n\r\n\r\n\r\n<li>Negotiate commissions<\/li>\r\n\r\n\r\n\r\n<li>Appoint retail agents<\/li>\r\n\r\n\r\n\r\n<li>Adjust losses and resolve claims<\/li>\r\n\r\n\r\n\r\n<li>Collect premiums and maintain agency balances<\/li>\r\n\r\n\r\n\r\n<li>Receive or prepare account reports and communicate them to the insurer and state regulators, as required<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Who Can (and Can\u2019t) Be an MGA?<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>Many of the people I spoke with performed some or all of the tasks listed above.\u00a0But the definition of an MGA also includes some restriction that made many of them ineligible to be licensed as MGAs.<\/p>\r\n\r\n\r\n\r\n<p>The NAIC model regulation goes on to explain that an MGA must underwrite \u201can amount of gross direct written premium equal to or more than five percent (5%) of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year \u2026\u201d<\/p>\r\n\r\n\r\n\r\n<p>Additionally, an MGA must do at least one of the following:<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>Adjust or pay claims in excess of ten thousand dollars ($10,000) per claim<\/li>\r\n\r\n\r\n\r\n<li>Negotiate reinsurance on behalf of the insurer<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>Again, the specific requirements vary from state to state, but it\u2019s the minimum premium standard that\u2019s the most common stumbling block.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>An Overview of the MGA Licensing Process<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>Those who\u00a0<strong><em>do<\/em><\/strong>\u00a0meet the criteria to apply for an MGA license often find the process much more complex than that for applying for a producer\u2019s license.\u00a0(And speaking of producer licenses, lots of states require MGAs to hold active licenses that cover the products they will be managing and services they provide before they apply for an MGA license.)<\/p>\r\n\r\n\r\n\r\n<p>First, a number of states still process MGA license applications on paper, often using state-specific forms.\u00a0Next, some states offer MGA licensing for individuals and business entities, while others license only entities or only individuals.\u00a0Some states require both an entity and an individual from that entity to be licensed while others require only the entity to be licensed.<\/p>\r\n\r\n\r\n\r\n<p>In addition to the license application, states often require potential licensees to provide proof of financial stability.\u00a0This proof usually takes the form of bonds, errors and omissions (E&amp;O) policies, and financial audits completed by independent parties.<\/p>\r\n\r\n\r\n\r\n<p>Bonds may be surety or fidelity bonds, depending on the state.\u00a0The amounts vary widely.\u00a0In many states, the bond requirement reflects the volume of monies the MGA handles.\u00a0Most commonly, it\u2019s a percentage of the gross direct written premium.\u00a0Fortunately, states usually set a cap for bonds.\u00a0These also vary from state to state, ranging from a minimum of $5,000 (thank you, Idaho!) to a maximum of $500,000.<\/p>\r\n\r\n\r\n\r\n<p>E&amp;O policy amounts vary, too.\u00a0It may be a set figure for all MGAs or a percentage of the gross direct written premium.\u00a0In those states that use the percentage system, there\u2019s usually a minimum amount, too.\u00a0The MGA pays whichever sum is greater.<\/p>\r\n\r\n\r\n\r\n<p>States often want to review and approve the contracts between MGAs and insurers, too.\u00a0This ensures that contract language meets the states\u2019 regulatory requirements.\u00a0Even in states that don\u2019t \u201crequire\u201d contracts be submitted, it\u2019s a good idea to have them on hand.\u00a0Several states require MGAs to be able to produce contracts on demand.<\/p>\r\n\r\n\r\n\r\n<p>The states sometimes have other requirements as well.\u00a0These range from fingerprint requirements to requesting a copy of Articles of Incorporation\/Formation to state-specific questionnaires and forms.\u00a0Insurers may also need to file appointments for their MGAs with regulators.<\/p>\r\n\r\n\r\n\r\n<p>Several states don\u2019t issue an MGA license\u00a0<em>per se<\/em> but require MGAs to go through a very similar process to obtain a registration, designation, or endorsement\u00a0(Hey, a license by any other name).<\/p>\r\n\r\n\r\n\r\n<p>Additionally, a number of states do not issue a managing general agent license at all.\u00a0In these states, those providing MGA services will need to secure alternate licenses, such as property and casualty producer licenses, surplus lines licenses, and even adjuster licenses.\u00a0The functions it will perform on behalf of an insurer in the state determine which licenses a managing general agent needs.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>So, If I\u2019m Not an MGA, What Am I?<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>For those who don\u2019t meet the requirements for an MGA license, alternative licensing is essential.\u00a0Licensing needs to reflect the products the \u201cnot-an-MGA\u201d administers for its insurers.\u00a0Most MGA-like agencies serve the property and casualty market.\u00a0For them, P&amp;C producer license(s) are a must.\u00a0If they place business outside the admitted market, surplus lines licenses are also necessary.\u00a0Additionally, adjuster licenses may be required if entities\u2019 responsibilities include adjusting claims.<\/p>\r\n\r\n\r\n\r\n<p>Remember that if the firm is being licensed as an agency, an individual license for the same lines of authority will likely also be required.\u00a0This licensed individual serves as the Designated Responsible Licensed Producer (DRLP) for the agency\u2019s licenses.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>The Evolving Role of MGAs<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>Given the complexity of the process, you might ask, \u201cWhy would anyone want to be a managing general gent?\u201d\u00a0The answer is that the role of MGAs is evolving as we speak.<\/p>\r\n\r\n\r\n\r\n<p>At the turn of the last century, MGAs were a way for insurance companies, who were typically based along the Eastern Seaboard, to meet the needs of geographically isolated clients throughout the western states.\u00a0Insurers could serve such clients without maintaining full offices in the distant locale.\u00a0Less than a century later, however, evolving communication technologies and the internet made it practical for insurers to deal directly with clients nationwide.\u00a0The number of MGAs declined.<\/p>\r\n\r\n\r\n\r\n<p>Now, however, MGAs are resurging.\u00a0Carriers want to improve efficiency and reduce costs\u00a0without sacrificing the client experience.\u00a0MGAs, which can optimize their staffing and processes for specific functions, offer an ideal means to achieve this goal.<\/p>\r\n\r\n\r\n\r\n<p>MGAs also serve as\u00a0<a href=\"https:\/\/www.insurancetimes.co.uk\/news-analysis\/in-focus-mgas-are-undoubtedly-the-sexy-side-of-insurance-but-what-is-driving-their-increasing-relevance\/1442858.article\" target=\"_blank\" rel=\"noreferrer noopener\">gatekeepers of specialist insurance<\/a><a href=\"#_msocom_1\">[EN1]<\/a>\u00a0\u00a0markets.\u00a0Their smaller size and ability to focus on a narrow product range and\/or a specific geographic region make them an ideal fit for specialty products such as cyber-risk insurance, flood insurance, etc.\u00a0Partnering with MGAs gives carriers access to these niche markets without the start-up costs and investment of time required to develop similar expertise.<\/p>\r\n\r\n\r\n\r\n<p>The MGA may have another role to play as well.\u00a0Insurtech firm Next Insurance <a href=\"https:\/\/www.carriermanagement.com\/news\/2018\/05\/24\/179706.htm\" target=\"_blank\" rel=\"noreferrer noopener\">made the move from digital agency to insurance carrier<\/a>.\u00a0CEO and co-founder Guy Goldstein stated that their time as an MGA was a very intentional part of this business plan.\u00a0Whether other MGAs, especially other insurtechs, will follow Next Insurance\u2019s lead remains to be seen.<\/p>\r\n\r\n\r\n\r\n<p>Additionally, many insurtech firms utilize the MGA structure as an intermediate step in their evolution from digital insurance agencies to insurance companies.<\/p>\r\n\r\n\r\n\r\n<p><strong>Two Great Resources for MGAs<\/strong><\/p>\r\n\r\n\r\n\r\n<p>Texas and Florida issue more MGA licenses than any other states.\u00a0Here are links to the sections of their state statutes that pertain to managing general agencies:<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><a href=\"https:\/\/statutes.capitol.texas.gov\/Docs\/IN\/htm\/IN.4053.htm\" target=\"_blank\" rel=\"noreferrer noopener\">Texas Insurance Code \u2013 Managing General Agents<\/a><\/li>\r\n\r\n\r\n\r\n<li><a href=\"http:\/\/www.leg.state.fl.us\/statutes\/index.cfm?App_mode=Display_Statute&amp;URL=0600-0699\/0626\/Sections\/0626.7451.html\" target=\"_blank\" rel=\"noreferrer noopener\">Florida Statutes \u2013 Managing General Agents<\/a><\/li>\r\n<\/ul>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<p>Find out how ReSource Pro helps insurance agencies and producers meet their licensing and compliance needs by <a href=\"https:\/\/www.resourcepro.com\/services\/compliance\/\">visiting our compliance page<\/a>.<\/p>\r\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>The exact wording of each state\u2019s MGA definition varies slightly, but the fundamental principle is the same; an MGA acts\u2014in a limited way\u2014as an underwriter. The contract between the MGA and the insurer spells out its specific duties and tasks.<\/p>\n","protected":false},"author":64,"featured_media":13123,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1],"tags":[],"news-category":[],"insurance-segment":[28],"services":[],"type-of-content":[38],"resource-type":[67],"class_list":["post-13122","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","insurance-segment-mga-wholesale","type-of-content-blogs","resource-type-blog"],"acf":[],"publishpress_future_action":{"enabled":false,"date":"2026-04-19 10:49:22","action":"change-status","newStatus":"draft","terms":[],"taxonomy":"category","extraData":[]},"publishpress_future_workflow_manual_trigger":{"enabledWorkflows":[]},"_links":{"self":[{"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/posts\/13122","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/users\/64"}],"replies":[{"embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/comments?post=13122"}],"version-history":[{"count":3,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/posts\/13122\/revisions"}],"predecessor-version":[{"id":15933,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/posts\/13122\/revisions\/15933"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/media\/13123"}],"wp:attachment":[{"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/media?parent=13122"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/categories?post=13122"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/tags?post=13122"},{"taxonomy":"news-category","embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/news-category?post=13122"},{"taxonomy":"insurance-segment","embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/insurance-segment?post=13122"},{"taxonomy":"services","embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/services?post=13122"},{"taxonomy":"type-of-content","embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/type-of-content?post=13122"},{"taxonomy":"resource-type","embeddable":true,"href":"https:\/\/www.resourcepro.com\/wp-json\/wp\/v2\/resource-type?post=13122"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}