What Are Managing General Agents (MGAs) In The Insurance World?

Whether you are a recent graduate trying to sell a new product, or an established professional breaking into a new market, there is one thing all entrepreneurs have in common: they need insurance.

Most young professionals view insurance as a commodity – you buy it because you need it and it doesn’t matter where you get it. When it comes to auto insurance, this mindset isn’t far from the truth. An auto policy is an auto policy – when is the last time you even read your auto policy? When it comes to commercial insurance however, no two policies are the same.

While no licensed driver could be that different from any other licensed driver, two new businesses may have little-to-nothing in common.

Products, services, employees and revenue will vary greatly from one business to the next. As these factors change, so does the risk of being held liable for damages your business causes or contributes to. A start-up delivering baked goods to the community is going to have a much lower risk of a lawsuit than a start-up delivering malt liquor. Ask yourself this: would you rather be on the hook for any law suits against the bakery or the brewery? What if you would get paid ten times as much to assume liability for the brewery? With greater risk comes greater premium.

But what happens when the risk is too high? Many companies will assume liability for a bakery, or even a brewery, but what about a travelling circus, or a manufacturer of explosives? Not many insurers would be willing to assume liability for those types of operations. When no one company wants to assume such liabilities the insurance industry turns to companies called MGAs (Managing General Agents). MGAs can write subscription policies that involve one client, but potentially many insurers. While it may be impossible to find a company willing to assume 100% liability for many high-risk operations, it is often possible to find several markets, each willing to take a portion of the liability. By writing subscription policies MGAs benefit insurers by allowing them to generate revenue without taking undue risks, and they benefit the public by providing insurance solutions for businesses that would otherwise struggle to find a market willing to underwrite their risk.

A10K Insurance is an MGA specializing in Agricultural and Commercial Insurance. Contact us today.