Questions about starting an MGA

[paulbennings]

Hi all,

I was wondering if anyone here had any ideas, opinions or advice they could offer about starting a GA. Specifically, I am wondering about two things:

1. How difficult is it to get appointed with the E&S carriers? (obviously, this is the most important question!)

2. What software options are available?

I talked with Vertafore about AIM and AMS. AIM is very expensive but AMS is much more reasonable; however, it lacks some of the necessary capabilities that a GA would need (so I am told).

Any other advice or personal experience would be appreciated.

Thanks!

PB

[Duke]

If you're experienced in the surplus lines business and are already known and trusted by the carriers that you want to represent, and have a solid business plan that will show the companies just how you'll get them a reasonable volume of business, you've got a good shot at getting appointments. Anything less than that and, I'm afraid, you're not going to get anywhere.

[LadyBroker]

Your post states "starting an MGA" and then you go on to say a "GA". Those are 2 different types of organizations in the E&S world. To be an MGA, the carrier gives you the binding authority on their behalf. If you are not already doing this kind of business, I would say it would be very difficult to break into this field by yourself. If you are writing for someone now, and doing it for your current employer, yes, you may have success in getting the appointment. To be a successful MGA, you really do need 5 or 6 different carriers, though, would you be able to do that?

If you are looking to open your own General Agency, or Broking agency, that's a bit easier....but again, you would need to be able to trade on existing good relationships for an apointment.

The bigger issue for either an MGA or GA is this question - how much premium can you feed your markets? I am seeing our contract binding carriers (Century Surety, Nautilus, General Star, Penn Star) cancelling existing appointments for lack of production. To convince someone to open up a new shop, you are going to have promise premium volume, and then deliver it.

[paulbennings]

Thank all.

LadyBroker, thanks for making that distinction. I had no idea about the distinction between MGA and GA. OF course, I know about "having the pen" for certain carriers, I just didn't know that MGA specifically pertained to that.

Our plan is to ultimately having binding authority so it's good to know what we need to do to get it.

My experience is retail; my partner's is wholesale and he has some pretty strong relationships with the UWs, so we are hopeful that will help. Also, we are hard at work on a business plan actually. I had a pretty good idea that a strong plan would help immensely given my own experience getting retail appointments. Do you by any chance know if carriers have strict capital requirements for new GA's?

Any other advice anyone would care to offer would be greatly appreciated.

[Mike @ Epic-Premier]

PB,

Agree with input above. You might also find some helpful information through an association named AAMGA (American Association of Managing General Agents). They provide good resources, such as a whitepaper on E&S business on their website at http://www.aamga.org/education/ens1.

And check out ConceptOne™ for software. Epic-Premier (and offering full disclosure here, I am the marketing director for Epic-Premier) offers a product called ConceptOne™ that provides the full management capabilities required by MGA’s such as policy, accounting, claims and document management with integrated rating, issuance and reporting (http://www.epic-premier.com).

Mike

[paulbennings]

Thanks Mike. That website is really a nice resource. I will be contacting your company to learn more about the system you have.

I really appreciate everyone's input so far.

[ron @ counterpoint]

Paul,

In addition to all of the other helpful posts here, you might want to check out the latest Guy Carpenter survey of MGA's and Program Administrators to look at some of the challenges and emerging needs of the market, as well as statistical data regarding overall maket size and dynamics. The latest one I know of can be found here: http://www.guycarp.com/portal/extranet/ ... rvey?vid=1

In terms of systems, there are some lesser-known smaller companies that provide affordable technology for start-ups that allow you to purchase the technology you need today and add additional technology as your agency grows. Counterpoint Software, Inc. (http://www.counterpointsoftwareinc.com) provides such solutions (Full Disclosure: I am the VP of Business Development for Counterpoint). Good luck!

Ron T.

[AgencyEquity]

I have put together a guide to starting an insurance agency, though it has been written for starting an Independent retail agency, there are some sections that may apply to starting a wholesale agency. Nevertheless, one of the other replies has nailed it, you really need to have experience at least a producer of a wholesale operation. Nevertheless, my guide can be found at this URL:
http://www.agencyequity.com/component/c ... nce-agency
As far as agency management systems go, many of the existing vendors who do retail agency systems also do wholesale agency systems. I have a list of over 20 of these vendors on my site, I beleive most have a systems that are wholesale compatible. You can find this list at:
http://www.agencyequity.com/listings/in ... nt-systems
I should also say that I truly feel that Vertafore and Applied have some great, yet costly systems. Most of the other vendors sell some very good systems as a fraction of what the two big players sell their system for.

[paulbennings]

Thanks all. I really appreciate all the comments and help. This is such a useful forum.

Ron, I emailed your company earlier today about your software solutions and hopefully we can discuss them soon.

[dm307799]

I represent about 12 E&O markets (4 direct & 4 brokers) & I do know finding E&O when you are acting as an MGA is tough noogie's!

[paulbennings]

Thanks DM. I actually called around and got a quote for about $5,000, which is MP I was told. I was expecting that.