Insurance carriers often call on a variety of agencies to help excel the business. Two of these agency types include Managing General Agents (MGAs) and Managing General Underwriters (MGUs).
When comparing the differences between these agency types, there are a few considerations. For the industry at large, these agency types are interchangeable.
The WaterStreet Policy Administration Suite offers flexible solutions and attractive price points for MGAs and MGUs who are looking to automate unique workflow business models at prices that fit their business model. – Kelly King, COO
Compare MGAs vs MGUs
There are very few real differences between MGAs and MGUs. MGUs and MGAs are both considered agents or brokers, licensed by a state as an MGA or MGU. Statutes of certain states vary for these agencies to adopt one term over the other. From the perspective of most carriers and insurance industry businesses, they are interchangeable terms.
MGAs and MGUs are both a type of insurance agency that can manage the selling, policy administration, underwriting processes and claims management processes. Acting as an arm of an insurance carrier, both agency types fill the same role in their abilities.
The key difference between MGAs and MGUs is in their method of licensing. Depending on the state, it is often easier for an agency to license as an MGU. This means it is also typically easier to start an MGU business. Both are authorized to conduct business by their given state and licensing requirements vary to allow these businesses to adapt to market needs.
Historically, MGUs have had less experience with claims administration, but these offerings have expanded across MGUs in more recent years.
Both MGAs and MGUs also share similar business cases.
An MGU or MGA may have developed and controls a specific class of business or businesses to efficiently sell within a niche of certain products. Over time, these agency types can develop a market among agents and brokers in which they control a sizable book of business.
Carriers might find certain MGAs or MGUs specialize in niche product lines. These specialties will depend on the history of the agency and the state of the agency’s licensing. Whether the carrier desires an expansion into agriculture insurance, real estate insurance, technology insurance or other niche lines, the title of the agency as an MGA or MGU is not an indicative sign of expertise.
These specialty strengths allow certain MGAs and MGUs to attract carriers with the potential to enter markets without the carrier requiring expertise and infrastructure in those businesses. The MGA or MGU has the expertise, the producers, the systems, the underwriting methods, claims management methods, and reinsurance relationships if needed. Both MGAs and MGUs have the ability to fulfill all areas for the carrier. The commission for MGAs and MGUs is likely to be anywhere between 20% and 40% depending on the line of business.
Both MGAs and MGUs perform all of the same functions as an insurance carrier, thus their needs are typically the same. All three businesses need policy administration systems, claims administration systems, analytics and reporting. All three will also likely need unique workflows to connect with front end production sources, workflow the underwriting decision through the binding process, workflows for claims management, and to connect with all manner of third-parties parties.
WaterStreet Company, MGAs & MGUs
WaterStreet Company supports carrier, MGA and MGU efficiencies with robust and tailored solutions. WaterStreet insurance solutions are flexible and backed by decades of experience in P&C insurance.
WaterStreet Company offers Policy Administration for carriers, MGAs and MGUs to thrive. Our solutions bring insurance data together across silos of the business, strengthening communication between carriers and agencies, and offering advanced learnings to empower the company’s decision making within one unified solution.
We understand the importance for carriers, MGAs and MGUs to adapt to market changes. Ask us about our additional services for accounting, policy, distribution and customer service support.
Reach out to WaterStreet Company today to request a consultation and demo.