What Is a Managing General Agency ?

Posted on August 20, 2011 and updated December 4, 2018 in Canadian Life Insurance Companies, Life Insurance Canada News 2 min read
Insurance broker
MGAs connect brokers
to insurance companies.

Managing General Agencies (MGAs) are intermediaries that connect insurance companies with brokers. More specifically, MGAs are essentially given a contract by insurance companies to manage business for a group of brokers.

Contrary to a popular misconception, MGAs do not deal directly with clients. Rather, they supply their brokers with a variety of products from different insurance carriers.

MGAs evolved as the idea of the in-house career agency began to fall away in the ’90s and early ’00s. Traditionally, insurance company hired their own in-house insurance advisors to sell their products, but largely as a measure of cost-cutting, large insurance companies such as Canada Life, Standard Life, and Manulife shifted away from the agency system and adopted the MGA model.

Some companies, such as RBC and Sun Life, still use both models to this day. However, within the MGA market, larger companies have recently been merging to create scale and reduce costs. An example of this was a recent major transaction between World Source Insurance Network [WIN] when it merged with IDC Financial to become IDC World Source Insurance Network. [IDC WIN]

As a result of these larger mergers, many smaller MGAs are also feeling the financial crunch thanks to increased regulatory and compliance costs.

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