Starting an MGA (Managing General Agency): 3 Important Considerations

June 8, 2020, Posted by: Aaron DiCaprio

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Starting an MGA can seem daunting, but it doesn’t have to be. The more you know about how to start an MGA, the higher your chance of success will be.

MGAs, or managing general agents, refer to a general underwriter who is authorized to administer and negotiate insurance contracts for insurers. Think of MGAs as specialized insurance brokers. MGAs are often involved with offering unusual insurance lines of coverage, such as surplus lines of insurance and professional liability insurance.

3XY provides consulting services to insurance executives who want to accelerate growth. Aaron DiCaprio, the founder of 3XY, has renowned experience as an insurance consultant and has been honored by Insurance Business America magazine for being one of the 50 market experts who go above and beyond.

What To Know Before Launching an MGA Start-Up

Follow along with CEO Aaron DiCaprio as he discusses MGA startups

Before you launch a successful MGA, you need to know a few things about the career path. MGAs are more than just insurance underwriters. They are also highly skilled wholesale agents who possess expertise that insurers may not have. That is why their services are so highly valued by insurance carriers. Here are three things to consider before launching your MGA startup.

Entrepreneurship

As an entrepreneur, you need to ask yourself what you want from your MGA start-up. Your ‘why” has to be stronger than the challenges you will inevitably face. There are many benefits that come along with entrepreneurship, including making quick decisions, having the freedom to be efficient with your time (no wasted time in meetings or conference calls), and finding deep meaning in what you do.

One of the top benefits of owning your own MGA start-up is equity. When sold at a multiple of Ibadan, equity can be very lucrative. You may also be able to get a portion of the underwriting results through a profit share or other bonus structure.

There are also challenges that come with MGA ownership. Although you don’t have a “boss” to report to, you do need to answer to your clients and investors.

Understanding Investor Needs

In order to run a successful MGA startup, you need to clearly understand what your investors want and need. Investors are looking for MGAs who really know their business and have the right connections. They also want to see a good return on their investment, and often expect multiples of six to thirteen times on average.

Understanding Carrier Partner Needs

In addition to understanding your investors’ needs, you also need to have detailed insight into your carrier partners’ needs. Insurance carriers rely on managing general agents to provide knowledge and expertise they don’t already have. You can’t run a successful MGA business unless you have insurance contracts with quality carrier partners. The best partnerships are based on a mutual track record of success.

Step-by-Step Guide to Start Your MGA

We hope you enjoyed this free guide on starting an MGA.

About 3XY

3XY provides innovative solutions and consulting services to insurance executives looking for a competitive edge, as those looking to launch their own MGA. Tap into our exclusive programs and products; leverage markets, partnerships, and talent; and capitalize on digital capabilities to accelerate growth and increase profitability. Contact us today at 215-322-5497 and see if we can grow your insurance business and improve its profitability. 

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