If you are involved in the insurance industry
, then you have probably heard of the terms MGA and MGU. But what do they mean? And more importantly, what is are the main differences between an MGA vs MGU? In this blog post, we will discuss the differences between managing general agents (MGAs) and managing general underwriters (MGUs). We will also look at the benefits of each type of organization's expertise and provide some examples.
What is an MGA?
An MGA is an independent insurance agent who sells insurance policies through a network of local offices. These offices are owned by the MGA but operated independently. Each office has its own staff, including salespeople, managers, and administrative employees. The MGA owns all of the assets needed to operate the business such as buildings, vehicles, computers, etc.
The MGA provides training to new hires and manages the day-to-day operations of the office. They also handle claims and pay out claims made by policyholders. This means that if there is a claim made against one of your clients’ policies, the MGA pays it out.
The MGA can choose to use any number of different carriers to write insurance policies for their clients. However, most companies prefer to use only one carrier because it makes things easier for both parties. For example, if the client wants to switch insurers, it would be much easier to make the change if they were using just one insurer.
In addition to selling insurance policies, the MGA may offer additional services like property management and financial planning.
What is an MGU?
An MGU is an insurance company that works with agents to provide insurance products to their customers. Because of this relationship, the MGU takes care of everything related to the sale of the product. They process claim payments and paperwork and manage customer service requests.
When a consumer purchases a policy from an MGU, they usually receive a bill from the MGU. This bill includes the premium amount for the policy along with the cost of the insurance policy itself. It also includes any applicable fees associated with the policy. The MGU typically charges the consumer a commission fee when they sell the policy.
Why Use an MGA?
There are many reasons why an MGA is better than an MGU. Here are some of the main ones:
1. Lower Overhead Costs – Since the MGU handles all the back-end processes, they save money on overhead costs. The MGA does not need to hire extra people or purchase expensive equipment. As long as the MGA is able to keep up with the demand for insurance policies, they should be able to cut their costs significantly.
2. More Control – An MGA gives you control over how your business operates. You can set your own hours, work from home, and even hire your own employees. On top of that, the MGA is responsible for paying out claims and handling other administrative tasks. So, if something goes wrong, you know that the MGA will take care of it.
3. Better Service – When you deal directly with an insurance carrier, you get better service. Insurance carriers have higher standards for customer service and want to ensure that their customers are satisfied. If you go through an MGA, you will probably get better service since they already have relationships with the insurance companies.
4. No Commissions – Another benefit of working with an MGA is that you do not have to share commissions with anyone else. If you decide to sell insurance yourself, you will likely have to pay commissions to brokers, agents, and other third-party vendors.
5. Better Rates – Lastly, if you work with an MGA, you might be eligible for lower rates. Most insurance companies offer discounts to businesses that have been in operation for a certain length of time. In addition, large groups of consumers often qualify for specialty insurance products. These discounts can help offset the cost of purchasing insurance policies.
Examples of Using an MGA
Some examples of insurance companies that use MGA include: Allstate
, Farmers, Nationwide, State Farm
, USAA, Progressive, Liberty Mutual, Travelers, Hartford, MetLife, and more! These companies utilize MGA's because they need someone that can take over company operations, such as office organization or administrative tasks.
Why Use an MGU?
The benefits of working with an MGU outweigh those of working with an MGA. Here are some of them:
1. Less Costly – Unlike an MGA, an MGU is cheaper to start. There is no need to invest in costly marketing materials or advertising campaigns. And because the MGU does not handle the back-end processes, there are fewer expenses involved.
2. Faster Turnaround Time – Since the MGU has less overhead, they can move faster than an MGA. For example, they may be able to issue a policy within 24 hours instead of 48 hours.
3. Easier Marketing – A lot of insurance agencies require that their agents use specific software programs to market their products. However, most MGUs do not require this type of insurance program. They can simply advertise online or send direct mailers to potential clients.
4. Easy To Start – While an MGA requires a license, an MGU only needs a simple website. Plus, an MGU does not need physical office space. This makes it easier to start a new business.
So which one is right for you? It depends on what kind of business you run. If you are looking for more control over your operations, then an MGA's expertise could be a good fit for you. However, if you want to minimize overhead costs, then an MGU could be a great choice.
Examples of Using an MGU
There are many different types of insurance companies that use MGUs. Some examples include: American Family, Blue Cross/Blue Shield
, Cigna, Health Net, Humana, United Healthcare, Kaiser Permanente, and more! These companies utilize MGUs because they are able to afford to cut down on overhead costs. Also, they don't need to spend as much money on marketing materials and advertising campaigns.
What is the Main Difference Between an MGA vs MGU?
The main difference between an MGA and an MGU is that an MGA handles all the administrative tasks while an MGU merely provides a platform where you can sell insurance.
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