Insurance Distribution 101: How MGAs (Especially in P&C) Can Get Started

Insillion’s MGA101 series introduces A Guide to Insurance Distribution Channels for New and Aspiring MGAs.  

Hosted by Chris Lowell, Managing Director at InnSure (a nonprofit innovation hub at the intersection of insurance and climate change), this series features Alexis Vaughn — bestselling author of The Future of Insurance Distribution for Agents and Brokers, and a leading expert in insurance and Insurtech distribution and CEO of Off Course Consulting. 

Drawing on more than 15 years of experience across the entire distribution chain, from captive and independent agent to MGA founder, top brokerage professional, and Insurtech leader, Alexis breaks down the complexities of insurance distribution into clear, actionable insights that MGAs can use. 

In the first episode, Chris and Alexis explore the 9 major insurance distribution channels available and the strategic decisions new and aspiring MGAs need to make to successfully bring their product to market.

What are BGAs? How do they differ from MGAs? 

Brokering General Agents (BGAs) choose to focus on distribution, specifically in Life and Annuity space. MGAs, on the other hand, focus on underwriting and bespoke product development. They act as wholesale distributors and help agents, brokers and MGAs get appointed with major carriers. 

National BGAs typically hold preferred agreements with these carriers and can give MGAs access to channels they might not have otherwise, explains Alexis. 

Types of Insurance Distribution Channels 

Alexis outlines 9 distribution channels that MGAs can adopt: 

Direct-to-Consumer

According to Alexis, this model should give clients easy, direct access to an MGA’s products and services without having to engage with an intermediary unless necessary. This looks like a fully online, integrated customer experience up until the quote or bind stage where a broker or agent typically steps in.

Alexis also emphasizes that Insurance is a relationship-driven business, and that having a human-in-the-loop (agent or broker) is integral to a complete client experience.

An MGA’s road to a seamless customer journey is often paved with these common challenges — learn to identify and resolve them with our industry advisor’s thought leadership on enabling collaborative underwriter-distribution partner relationships in the P&C space.

Wholesaler

A wholesale broker acts as an intermediary between an MGA and retail agents or broker. For MGAs just starting out, wholesalers are often the first distribution channel they tend to approach, due to their vast access (5000-10,000 brokers/agents) to networks of agents, brokers and different markets.

Wholesalers are generally expensive due to the scale and quality of market access they provide MGAs with.

Retail Agent

Also known as independent agents, retail agents function as frontline points of contact for clients, advising them on policy selection, renewal, and the claims process.

Using this distribution channel requires more effort than taking the direct-to-consumer or wholesalers channels as MGAs must educate independent agents so that they can accurately identify and approach clients who would benefit from the MGA’s specialized product.

For MGAs just entering the market, Alexis’s advice is to start with a wholesaler, which allows retail agents to first experience the MGA’s product and assess it. With time, if the product does well in the market, MGAs can establish direct relationships with agents, providing them a minimum commission to deal directly with the MGA instead of going through a wholesaler.

Insurance Brokers

While agents work on behalf of carriers, brokers work on behalf of the end clients. Their role is to consult and recommend the right type of insurance rather than sell a single carrier’s product. Large firms such as Aon and Marsh represent this distribution channel and are constantly seeking new markets to place their business in.

While retail agents focus on selling insurance, brokers are focused on recommending the coverage most suitable for their clients. For MGAs, brokers are especially valuable in the Small, Medium and Large business markets and high-net-worth markets, making them a key distribution pathway in addition to independent agents.

Embedded Insurance

This refers to the coverage offered as an add-on during the purchase of another product or service within a purchase journey. A common example is when clients buy airline tickets and are given the option to check a box for travel insurance. This distribution channel allows insurance to be seamlessly integrated into non-insurance transactions, opening up a new market of opportunity for MGAs.

Alexis notes that MGAs and MGUs increasingly pursue embedded insurance when they want to bypass brokers and retail agents, or even avoid going fully direct-to-consumer. It provides a simple, scalable way to reach clients directly at their point of need.

Affinity Solutions

This model offers insurance to groups such as associations or franchises, allowing risk to be spread across its members. For example, an MGA partnered with a franchise network like Chick-fil-A or Sonic could provide the same workers’ compensation policy to all employees at the corporate level.

This collective approach makes it possible for the group members to avail discounted, standardized products while helping carriers and MGAs further reduce costs by pooling risk.

Community-Based Insurance

This channel is a social model, with a focus on giving back. Alexis highlights Lemonade as an example, where a certain portion of sales is reinvested into the community. This model helps insurers rebuild trust with its clients, an area the insurance industry has a hard time with. By investing in insurance that powers positive social impact, MGAs can build more credible relationships with their consumers.

Aggregators

Aggregators are large insurance agencies that manage networks of independent agents under them. They hold direct appointments with carriers or MGAs and number in the hundreds- passing them on to their affiliated agents. This channel enables independent agents to access a broader range of products and markets than they could on their own, making aggregators a valuable distribution partner for MGAs.

Partner Ecosystems

Partner ecosystems involve co-branded insurance offerings embedded within the sale of a partner’s product or service. Alexis uses Rivian, whose vehicles are automatically paired with Nationwide insurance, or Tesla, which embeds its own insurance product as part of their car purchase journey, as examples here.

Choosing the Right Distribution Channel for your MGA

Alexis explains that the choice of channel for an emerging MGA should be driven by the product. The product type, the technology it requires, and the way customers interact with are what determine how the solution is distributed.  

For example, travel insurance products, including those designed for Airbnb hosts to cover cancellations should ideally be embedded into the customer’s retail experience. On the customer side, travel insurance options are most convenient when available and visible at the point of purchase. 

On the other hand, where products are positioned as group benefits, MGAs need to approach companies and organizations to pitch their products. Brokers are the ideal distribution channel in this case due to their relationship with decision makers of various companies. 

For MGAs to effectively position themselves in the Small & Medium Sized Businesses sector, they may need to rely on a mix of channels, including retail agents, brokers, embedded insurance, and affinity solutions (such as franchises and chambers of commerce). Multiple channels provide a wider reach for MGAs to effectively distribute their offerings across SMB markets. 

The First Step: Having a Great Team 

Typically, an MGA starts by identifying 2 potential channels to distribute its products through. To further evaluate each one’s pros and cons however, an MGA requires experts within the distribution space, notes Alexis. 

An ideal distribution team would be made up of people within these chosen channels, i.e. individuals who possess a strong natural market. These individuals can access an MGA’s target markets through their established relationships with the companies and decision-makers within them.  

Distribution specialists have a strong natural market because they speak the distribution partner’s language, bring deep experience, understand the channel’s pain points, and know how to position an MGA’s solutions effectively — both to win partners over and address the areas where those solutions deliver the most value.

MGA Distribution: Key Takeaways

There is no single “best” distribution channel for MGAs- it depends on the nature of the product and level of technology integration needed. The choice of distribution channel completes the MGA’s customer journey, so MGAs may need to use multiple channels to create the customer experience they have in mind.  

Employing the right team with strong industry connections and expertise is integral to the process as it guides the direction an MGA’s distribution journey will take. 

Early-stage MGAs often start with wholesalers to gain broad market access, and over time may build direct relationships with brokers, retail agents, and even ecosystem partners for growth. Embedded and affinity models are efficient channels to reach customers at their point of need, while aggregators and partner ecosystems open doors to new markets that may otherwise be out of reach. 

Follow Insillion’s Youtube channel for more distribution insights to come — In the upcoming video, Chris and Alexis outline the step-by-step process to getting started with MGA distribution, the economics of working with distribution channels, what these partners expect and value, and how new and aspiring MGAs should pitch their products effectively to launch and scale their businesses.