What Is A Brokerage General Agency
You want to know what is a brokerage general agency? A brokerage general agency (BGA) is an insurance wholesaler dedicated to supporting insurance agents and providing significant value to insurance carriers. This crucial intermediary aids both insurance producers and carriers in reaching their sales objectives.
The insurance industry is filled with acronyms, and BGAs are another key term to understand. We’ve previously explored numerous acronyms across personal lines, commercial lines, life, and health insurance. Now, let’s delve into the role of a brokerage general agency.
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what is a brokerage general agency in Insurance?
BGA stands for brokerage general agency. Unlike an insurance company or carrier, a BGA doesnât assume responsibilities like underwriting or claims settlement, which distinguishes it from an MGA (managing general agent) or MGU (managing general underwriter).
Instead, a BGA acts as a support system for independent insurance agents and producers. Often, smaller insurance agencies lack the necessary resources to operate independently, and insurance carriers canât provide individualized training for each agent.
This is where a BGA steps in, offering a range of services such as back office support, marketing, communication, branding assistance, access to carrier markets and products, and favorable commission splits. These services empower individual insurance producers to better serve their clients.
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How does an insurance BGA work?
A Brokerage General Agency (BGA) acts as a crucial intermediary between insurance carriers and independent insurance agents. Their primary role is to alleviate the burdens on independent agents, enabling them to concentrate on selling insurance policies effectively.
BGAs facilitate access to a wide range of insurance products that individual agents and smaller agencies may require for their clients.
In the insurance industry, BGAs are often referred to as “wholesalers.” Similar to wholesalers in other industries, they secure better terms for the agents they serve by essentially “buying in bulk.”
In simpler terms, independent insurance agents approach a BGA that has the insurance products their clients need.
The BGA then bundles a significant number of similar policies and negotiates with the insurance carrier to provide these policies in large quantities.
Why do BGAs exist?
In the early days of modern insurance, up until around the 1960s, insurance carriers distributed their products directly through their agents. Each carrier would individually contract, train, and support their agents.
However, as the range of insurance products grew to meet the increasing risks of the modern world, this direct model became impractical.
Insurance carriers lacked the resources to maintain a one-to-one support model for the tens of thousands of agents they worked with.
This led to the creation of marketing organizations. The primary role of these organizations was to recruit insurance agents, train them on carrier products, run sales illustrations, and provide the necessary support that carriers could no longer offer directly.
In this new model, carriers restructured their commission systems to allow commissions to flow to marketing organizations, such as IMOs, FMOs, BGAs, and others. These organizations would then take a small portion of the commission paid by carriers for each policy sold by one of their agents.
As this model grew, various levels of insurance marketing organizations emerged, each differentiating itself by the types of agents they recruited and the services they offered.
Although the direct carrier-to-agent relationship diminished, marketing organizations of all sizes could still secure top-level contracts with carriers, which meant the highest possible commission levels, up until the mid-2000s.
Recently, scalability challenges have led insurance carriers to limit top-level contracts to the largest organizations, known as national marketing organizations (NMOs).
Even the largest BGAs and IMOs now generally need to be part of an NMO to access carrier products, as direct contracts are kept to a minimum by insurance companies.
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Why Do Insurance Agents Collaborate with BGAs?
Insurance agents, brokers, and producers find immense value in partnering with a Brokerage General Agency (BGA).
BGAs grant them access to a broader range of insurance products, which they might not be able to procure independently, along with offering more favorable commissions on these products.
Moreover, BGAs provide comprehensive back-office support, which significantly enhances the success of insurance agents. This support includes:
- Offering consultations on niche or challenging client cases.
- Connecting agents with expert contacts to better serve their clients.
- Processing online insurance applications.
- Tracking the progress of applications and claims.
- Providing real-time policy quotes.
- Answering questions about underwriting requirements.
- Handling agent licensing and contracting on behalf of an insurance carrier when agents sell policies through the BGA.
Independent insurance agents often rely on the extensive experience and support that BGAs provide. While BGAs are a crucial resource, they are just one of many ways for agents to receive the support they need.
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Are BGAs Common in Health and Life Insurance?
BGAs, or Brokerage General Agencies, are predominantly found in the life and health insurance sectors, which also encompass long-term care insurance, annuities, and disability insurance.
For agents, collaborating with BGAs is particularly advantageous. These agents are often licensed to sell life, health, long-term care insurance, and annuities, though these may not be their sole responsibilities.
They may also offer securities and a range of services beyond basic life or health policies. The added support and expertise provided by BGAs help these financial professionals meet necessary legal standards when serving their clients.
Whatâs the Difference Between a BGA and an IMO?
Independent marketing organizations (IMOs) are similar entities within the insurance industry, often compared to field marketing organizations (FMOs) and BGAs. These terms are frequently used interchangeably due to their overlapping roles and lack of distinct legal definitions.
Traditionally, IMOs have catered to larger agencies with internal marketing capabilities, handling everything from letterhead and websites to social media and advertising. Recently, BGAs have begun offering similar services to stay competitive.
Despite their similarities, the distinction between a BGA and an IMO largely comes down to size and scope. In the insurance hierarchy:
- Individual agents form an insurance agency.
- Several agencies can belong to a BGA.
- Multiple BGAs can be part of an IMO.
- Multiple IMOs can join an NMO (National Marketing Organization).
Together, BGAs, IMOs, and FMOs play crucial roles in the insurance distribution channel, offering independent agents administrative support and services they would otherwise lack.
This support ensures insurance policies effectively reach their final destination with the insured.
Contact Sure Insurance today to discover how we can support your insurance needs with unparalleled expertise and care.
Frequently Asked Questions about what is a brokerage general agency
How Does an Insurance BGA Work?
An Insurance Brokerage General Agency (BGA) operates as an intermediary between insurance carriers and independent insurance agents.
BGAs have relationships with multiple insurance carriers and provide agents with access to a variety of insurance products.
They offer support in the form of marketing, underwriting assistance, case management, and training.
By leveraging their expertise and resources, BGAs help agents find the best policies for their clients and navigate the complexities of the insurance industry.
What is a Brokerage General Agency and Why Do Insurance Agents Work with a Brokerage General Agency (BGA)?
Insurance agents work with BGAs because they provide valuable resources and support that can enhance the agents’ business operations. BGAs offer a wide range of products from various carriers, which allows agents to present their clients with more options.
Additionally, BGAs provide training, marketing support, underwriting assistance, and case management services.
This partnership enables agents to focus more on selling and servicing clients, while the BGA handles many of the administrative and technical aspects of the business.
What is a General Agency Agreement?
A General Agency Agreement is a contract between an insurance carrier and a BGA. This agreement outlines the terms and conditions under which the BGA will operate, including the types of insurance products they can offer, the commission structures, and the responsibilities of each party.
It formalizes the relationship between the carrier and the BGA, ensuring compliance with industry regulations and setting expectations for performance and conduct.
How Do Brokerage General Agencies Make Their Money?
Brokerage General Agencies make their money primarily through commissions and overrides. When an agent sells an insurance policy, the BGA receives a commission from the insurance carrier.
In addition to the direct commission, BGAs often earn an override, which is an additional percentage of the premium paid by the policyholder. This override compensates the BGA for their role in supporting and managing the agent network, providing training, marketing, and other services.
Why Do Insurance Carriers Not Do This Themselves?
Insurance carriers often do not handle these functions themselves because BGAs offer specialized expertise and a broad network of agents that carriers may not have. By partnering with BGAs, carriers can expand their reach and market their products more effectively.
BGAs can provide focused support and resources to agents, something that might be less efficient for carriers to manage internally.
This division of labor allows carriers to concentrate on developing insurance products and managing risk while leveraging the BGA’s capabilities for distribution and support
Why Should Insurance Agents Work with a Brokerage General Agency (BGA)?
Insurance agents should work with a BGA because it can significantly enhance their ability to serve their clients and grow their business.
BGAs provide access to a wider range of products from multiple carriers, which allows agents to offer more tailored solutions to their clients.
The support services, such as marketing, underwriting assistance, and training, help agents operate more efficiently and effectively.
Additionally, the expertise and resources of a BGA can help agents stay competitive in a rapidly changing industry.
