You’d be surprised how many insurance professionals can be stumped when you ask them this simple question: “What is an MGA?”
OK, you probably do know that the acronym stands for Managing General Agents, but given that, would you know how to explain what an MGA is in the insurance distribution system or enumerate the benefits that MGAs can bring to the retail or independent insurance agency? These questions can give pause to even the most experienced agents, even those who have used the services of MGAs!
An MGA is one of two types of wholesale brokers, with the other being a Surplus Lines broker. As a wholesaler, the MGA acts as an intermediary or liaison between a retail agent and an insurance company. For a more detailed definition, we turn to the go-to insurance glossary folks at the International Risk Management Institute (IRMI). They define an MGA as:
“ … a specialized type of insurance agent/broker that, unlike traditional agents/brokers, is vested with underwriting authority from an insurer. Accordingly, MGAs perform certain functions ordinarily handled only by insurers, such as binding coverage, underwriting and pricing, appointing retail agents within a particular area, and settling claims.”
Insurance runs by the law of large numbers. It is not always economical or efficient for carriers to pursue emerging and niche markets, or to set up shop in remote areas of the country. MGAs can run with those markets and supply the deep expertise and service capabilities to manage those books of business for the insurer. MGAs can and do sell directly to insureds but working with retail agents affords exponential growth that is beneficial to both parties.
Here are 9 ways an MGA can benefit your insurance agency
- Differentiation. Most agencies are generalists, serving all comers. Some carve out a specialty or an industry focus that helps to differentiate their agency from the one down the street. Working with an MGA on niche or program business allows you to go deep, shifting your focus from a transactional all-things-to-all-people approach to more of a consultative business partner approach. Developing a reputation for sector expertise can help distinguish your agency from your competition over time.
Momentum. Go where the action is. MGAs have been the rockstars of the insurance distribution system over recent years. According to research and analysis by the highly respected Conning, the MGA market has nearly doubled since 2012, when it first began studying the sector. In 2016 alone, MGAs’ rate of growth exceeded that of the total property and casualty market by 32 percent. More recently, even in the face of pandemic disruption, “the Managing General Agent and program market continued its upward trajectory in 2020, with premium growth outpacing the overall property-casualty market.”
Access. Let’s face it. Most insurance agencies can only secure a limited number of carrier appointments due to volume agreements, changing appetites, and underwriting guidelines. MGAs help by broadening your agency’s access to specialty and non-standard insurers, both admittedand non-admitted, as well as to industry influencers. Most agencies would find it difficult if not impossible to secure such a broad array of markets and maintain active relationships over time.
Growth. Grow your insurance agency’s sales and premium with a focused marketing approach and the marketing and underwriting expertise of a trusted partner. Grow your bottom line with increased efficiencies and decreased administrative costs. Improve your sales hit ratio with help in structuring and placing complex insurance risks.
- Scale. Working on niche or program business affords a more targeted focus for both your marketing and client service activities, allowing you to grow your business without a substantial increase in staff, marketing outlays, and other operational expenditures.
- Expertise. Tap into An MGA that has expert knowledge about a specific line of coverage (liability, inland marine, cyber insurance, surplus lines, etc.) or a particular niche or product they serve. For example, at NIP Group, we work with retail agencies to service specialty insurance programs for over 25 niche industries. Working with the MGA will help you deepen your knowledge of the niche sector’s challenges, exposures, and solutions, which will help build your agency authority and reputation, increase referrals, and strengthen retention.
- Technology. MGAs often offer online platforms and tools that automate and streamline processes. This allows for faster quoting and renewals, better claims processing, and numerous efficiencies in other aspects of account administration. It also brings your agency better, faster, and more actionable data analysis.
- Sales & marketing support. Many MGAs provide a vast panoply of marketing and sales tools from brochures and handouts to digital marketing. Some provide white label marketing tools so that you can build your agency brand with professional materials. (See NIP Group’s White Label Specialty Programmarketing support). Focusing on a niche will afford more targeted marketing opportunities through industry lists, trade associations, publications, industry shows, sponsorships, blogs, and social media.
- Industry-specific loss control. MGAs develop deep expertise in the risks and exposures of the programs and industry niches they serve. Agencies can tap into and use any available resources and tools that the MGA provides (such as the NIP Vault) to prevent or mitigate losses. This, in turn, allows your agency to help its client base to prevent losses from occurring in the first place, or minimizing the cost of those that do occur.
There are many other reasons why your agency should work with MGAs – in fact, more than a decade ago, Insurance Journal compiled 50 Reasons Why Retail Agents Choose Managing General Agency Partners. These thoughts from agents have held up over time.
Working with NIP Group
NIP Group’s Specialty Brokerage is a market leading wholesale brokerage operation serving 25 niche industries. We target non-standard commercial risks underwritten by admitted and non-admitted specialty carriers. Agents can leverage our expertise in placing and servicing complex risks through relationships with global insurance markets. Our philosophy of providing ingenuity in insurance has established us as one of the nation’s most respected specialized business insurance and risk management intermediaries, and a recognized leader of innovative insurance solutions. Our brokers and the businesses they serve are the central focus of everything we do at NIP Group. We are service fanatics to the core, seeking to exceed expectations. We are committed to a core philosophy of true partnerships at every level.
NIP Specialty has the expertise, efficiency, and strengthened relationships that wholesalers can bring to the process.
NIP Group is open to all independent agents – Click here to get appointed today