Exploring the role of MGAs
Allen McGinniss, Principal, McGinniss Himmel Insurance Agency
Given the Tampa Bay Times article and the many questions it’s raised surrounding Florida insurance companies and the role that Managing General Agents (MGAs) play in their operation, I sat down with a veteran Florida insurance agent to get some answers. What is an MGA? What’s its function in our marketplace? And how and why does money go back and forth between an MGA and its insurance company?
Allen McGinniss is a licensed Florida insurance agent and the principal of the McGinniss Himmel Insurance Agency, based in Tallahassee. He began his insurance career 20 years ago as a State Farm agent before transitioning to the independent side in 2009 and co-founding his agency in 2015. We recorded our conversation as the latest episode of The Florida Insurance Roundup podcast titled “Facts vs. Fear.” He explained how MGAs and affiliates function, the financial dynamics of the insurance market, and the consumer safeguards built into the system.
MGA’s, he shared, perform essential administrative tasks for insurance companies, including underwriting, claims management, and even issuing and renewing policies. They can operate within an insurance company or independently. McGinniss said the Times article, among other things, failed to provide context regarding the operational costs and challenges faced by insurance companies.
“Yeah, the MGAs did make billions of dollars over that period of time because the Florida insurance market is a $20 billion premium market every single year,” McGinniss pointed out. “Insurance companies typically spend 30%, 35% of the premiums on administration. They’ve got to mail out forms, they’ve got to comply with regulation. They’ve got to underwrite policies, they’ve got to inspect them, they’ve got to pay claims. All that stuff is very expensive. And so, yeah, if you spend 35% of $20 billion it sounds a lot like $7 billion a year on expenses,” he said.
We discussed the substantial operational costs in running an insurance company that are necessary to manage claims responsibly to ensure they can continue to serve their clients. As a former Florida deputy insurance commissioner, I pointed out that Insurance Commissioner Michael Yaworski can ask an insurance company anything, anytime, anywhere, and has unfettered access to all of their financial reports. For anyone to insinuate otherwise is wrong.
McGinniss and I also discussed the Florida Legislature’s response to the Times article and Governor DeSantis’ response to the criticism, including him telling reporters he’s spoken with legislative leaders and made clear we’re not going to repeal any of the hard-fought insurance litigation reforms from 2022-2023.
McGinniss shared his thoughts on the broader misconception that all insurance companies are profiting at the expense of policyholders. He emphasized that the vast majority of insurance companies – and agents – are committed to serving their clients and managing risks responsibly. Profitability is essential for sustainability and market stability, something Florida’s 7.5 million residential insurance policyholders need now more than ever. The points he made on the importance of a balanced understanding of the insurance industry are golden and a must-listen! You can read more and listen here.
We’ll be back next Monday with our next newsletter!
See you on the trail,
Lisa.
