Managing General Agent

A managing general agent is any person who is hired by an insurer to be in charge of their insurance business. They act as a mediator for the insurance company and the bail agent. The managing general agent is accountable for managing, communicating with, and taking care of all the paperwork for the insurance company. This person protects the insurance company from being responsible in the case of forfeited bonds. The managing general agent also adjusts or pays claims, negotiates commissions, issues policies, processes endorsements, and discusses reinsurance of behalf of the insurer.

Benefits of a Managing General Agent

Insurers can benefit from hiring a managing general agent in a variety of ways.

• Managing general agents have knowledge that insurers may not have in their regional offices, which can be expensive if it is established in-house.
• Insurers can give managing general agents complicated tasks that take up a lot of time to complete.
• Most of them also work in areas of coverage including professional liability, employee benefits, or surplus lines. These areas require specialized expertise to underwrite policies. If there is a specialty line of business that the insurer is interested in but does not want to take on the risks of exploring it, then they can ask for guidance from the managing general agent. The insurer would also give the managing general agent the right to underwrite and issue specialty policies since they understand the risks involved.
• Just like insurers, agents can get information about a certain product or competitive pricing when working with a managing general manager. They are also able to gain access to markets and carriers that are normally harder to access by themselves. Due to the fact that managing general agent businesses are usually smaller in size, there are fewer obstacles to communication for an agent.
• When there are geographically isolated areas that insurers do not want to open an office, then managing general agents in that area can provide the company with access to new clients without spending money on employees or rent.
• Managing general agents offer their knowledge of online services, as well. These services may include, but not limited to, marketplaces, social media, app stores, communication services, and payment systems. This can help speed up the quoting process and allow agents to provide better services to their customers.

Licensing Process

Many states process managing general agent license applications on paper using specific forms required by the state. Many states also require a managing general agent to have an active producer license before they apply for a managing general agent license. A producer license covers the products that the agent will be managing and services they will provide.

Not every state does things the same. For instance, some states allow both individuals and business entities to acquire a managing general agent license, whereas other states license either individuals or entities. Then there are states that require only the entity to be licensed, whereas other states require both an entity and an individual from that entity to be licensed.

Along with the license application, states usually want proof of financial stability from the individual or entity applying. Such proof includes Error and Omissions (E&O) policies, financial audits done by independent parties, and the form of bonds. Bonds can either be surety or fidelity bonds and the amounts can vary widely. In a lot of states, the bond requirement is a percentage of the gross direct written premium. States do set a cap for bonds, which range from $5,000 to $500,000. E&O policies differ in amounts, as well. Depending on the state, it may be a set figure for all managing general agents or a percentage of the gross direct written premium. For those that go the percentage route, there is usually a minimum.

States will usually want to assess and agree with the contracts between the managing general agent and the insurer. This process makes sure that the language used in the contract meets the states’ regulatory requirements. Other requirements that states want include fingerprints, copy of Articles of Incorporation/Formation, and state-specific forms and questionnaires. They may also want insurers to file appointments for their managing general agents with regulators.

Not all states issue a managing general agent license, as such. However, they do require agents to complete a similar process to get a “registration” or “endorsement”. There are also states that do not issue a license at all. Instead, those who provide managing general agent services are required to have an alternate license such as a Property and Casualty producer license, surplus line license, and adjuster license. Depending on what services the managing general agent will provide on behalf of the insurer will determine what type of license the agent will need.