What significant difference exists between wholesale brokers and Managing General Agents (MGAs)?

The significant difference between Managing General Agents (MGAs) and wholesale brokers lies in the authority and functions they possess within the insurance industry. MGAs are unique in that they have the ability to underwrite policies on behalf of insurers. This means they can evaluate risks, determine premiums, and approve policy applications, all of which are crucial elements of the underwriting process. This capability allows MGAs to act with a level of autonomy and responsibility that wholesale brokers do not have.

Wholesale brokers, on the other hand, typically do not underwrite. Instead, their primary role is to serve as intermediaries between retail agents and insurance companies. They assist retail agents in finding coverage for their clients, particularly in cases where the market is not readily available through standard insurers, but they do not have the authority to make underwriting decisions.

Understanding this distinction emphasizes the functional differences in their roles within the insurance ecosystem. MGAs play a more integral part in the underwriting process, allowing them to manage and shape insurance offerings more directly compared to wholesale brokers, who focus primarily on connecting agents with carriers.