Many consumers are confused about the differences between managing general agents and insurance companies. The difference can be hard to understand because managing general agents possess a great deal of authority and may be mistaken for employees of the company.
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Managing general agents are licensed insurance agents chosen by insurance companies to underwrite coverage, assess risk and manage other agents in a particular state or territory. They are selected based on their experience, stability and ability to drive profits for the insurer. They are not employees of the insurance company.
Any claims filed will be paid by the insurance company, not the managing general agent. This is because the insurance company has underwritten the policy, not the agent.
Managing general agents select insurance agents to sell products on behalf of the insurer, and they have the authority to terminate contracts with unprofitable agents. While they have the authority to recommend an agency appointment, the company decides whether or not the appointee is fit for duty.
Managing general agents have the authority to bind and underwrite coverage on behalf of their insurance company. The company retains the authority to cancel policies it deems too risky.
The insurance company is ultimately responsible for honouring its contract with the insured. Most of the official policy declarations, insurance cards and bills containing contractual language will be issued by the insurance company, not the managing general agent.
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