MGA Group Rejects Criticism By PWC

By Mark E. Ruquet

NU Online News Service, May 29, 2:39 p.m.EDT?The leadership of a managing general agents group saida recent PricewaterhouseCoopers study criticizing MGAs' performanceis not descriptive of their membership.

Ronnie C. Moore, president, and Bernie Heinze, executivedirector of the King of Prussia, Pa.-based American Association ofManaging General Agents, disputed the report by Key Coleman titled"The Role of the Managing General Agent in the Post-9/11 Era--anEfficient Delivery Mechanism or a Risk Venture?"

Mr. Moore said Mr. Coleman's "use of the term ?managing generalagency' doesn't fit any of the AAMGA criteria that we use." He saidAAMGA has a very comprehensive code of ethics.

The cases Mr. Coleman cited in the report of poor and unethicalmanagement by MGAs did not reflect AAMGA members or brokers, hesaid.

Mr. Coleman, manager of financial advisory services for PWC inNew York, said he came by his views in dealing with a lot ofdisputes within the insurance industry.

Mr. Coleman told National Underwriter, in a telephoneinterview, that he has seen numerous cases of abuse of MGA'sunderwriting authority and instances of broken premium trustaccounts?two issues that are highlighted in the report. Theseinstances have made some carriers wary of dealing with MGAs,according to Mr. Coleman.

After 9/11, carriers began to pull back the authority they hadgranted MGAs, becoming much more selective, he said.

The question is, Mr. Coleman said, is the pull back permanent oris this just a phase in the cycle that will change when the marketsoftens again and companies seek market share?

"There is no reason to deny that MGAs have a place in themarket," Mr. Coleman said. But insurers, according to Mr. Coleman,are currently lacking the hard and fast processes they need toensure that the appointment of an MGA is free of the problems theyhave experienced in the past.

"Companies are not paying attention until problems arise," heobserved, and would avoid underwriting control problems if theyclosely monitored the relationship.

"I come into the process at two levels in my practice--one isdisputes and two is due diligence on MGAs or program managers," Mr.Coleman explained. "When something goes wrong, looking at it twoyears later, you go in and say, ?It was so clear what was goingwrong.' But maybe it was a soft market or maybe they thoughteveryone else was doing it."

"Yes, waiting too long adds to the problem," he said.

In his report, Mr. Coleman speaks to some of the problems andlays out the groundwork insurance companies need to follow whendeveloping their MGA relationships.

To read this entire article, see the June 2 print edition ofNational Underwriter.