What is the difference between an Insurance Agency and an MGA?

4.01.2022
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Insurance Agency:

An insurance agency, also known as an insurance agent, is an individual or company authorized by a carrier to sell the insurer’s products in exchange for commission or compensation. Insurance agencies or agents are regulated by the insurance laws of the country or state in which they work. Independent agents can sell or offer products from a variety of carriers, whereas captive agents only sell the products of the single insurer to the customers.

For example, ABC Insurance is an independent insurance agency. This agency has employed insurance agents to sell the insurance products of different types of insurance companies that they are authorized to sell insurance for. An agency doesn’t work for a single insurance carrier; they can be attached to other insurance companies also. It is their decision as to which insurance carriers they would like to attach. It’s also the decision of the agency which products, like personal or business products, they would like to sell. This would help their clients find the best coverage and prices available in the market.

Insurance agents or agencies are responsible for identifying the various sales opportunities for different types of insurance plans and overseeing a portfolio of clients. They are also responsible for identifying risk management strategies, handling policy renewals, and tracking claims, etc.

The Managing General Agent (MGA)

MGA is insurance agents or brokers who are specialized ones and are authorized to perform duties like underwriting authority for an insurer. Unlike traditional agents and brokers, they specialize in specific lines of business in insurance. These agents or brokers perform certain functions that are commonly handled only by insurers. These may include underwriting, binding coverage, pricing, appointing and training the retail agents within a specified geographical area, and handling the settling claims process.

More commonly, the MGAs are involved with unusual lines of coverage, such as professional liability, surplus lines of insurance, etc. For these types of coverage, specialized expertise is required to underwrite the policies. However, MGAs also write some personal lines of business in geographically isolated areas where insurers are not interested in opening branch offices.

The expertise that the MGA possesses is not always available within the insurer area or in regional offices. These factors benefit the insurers because it would be more expensive to develop them on an in-house basis.

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