Personal Producing General Agent (PPGA)
Dictionary of Insurance Terms for: Personal Producing General Agent (PPGA)
individual appointed by the insurance company as an independent contractor. The agent receives various expense allowances for office-associated expenses and direct commissions on products sold as well as overriding commissions on products sold by other company agents. The PPGAusually has contracts to sell products from many different insurance companies. Insurance companies usually make available to the PPGA advanced sales technical support by supplying technicians and computer software and, in some instances, computer hardware.
In insurance, a managing general agent is defined legally as “an individual or business entity appointed by an insurer to solicit applications from agents for insurance contracts or to negotiate insurance contracts on behalf of an insurer and, if authorized to do so by an insurer, to effectuate and countersign insurance contracts”. (This particular wording is from Kentucky Revised Statutes. Similar wordings can be found in the statutes of Oklahoma, Idaho, Arizona, Nevada, Wyoming, Florida, and Alabama.)
In the U.S. and Canada, managing general agents act as a “fronting” system for insurers, allowing filings to be made and proofs of insurance to be given in each other’s jurisdictions.
Depending on the appointment, a managing general agent may perform one of many tasks normally performed by an insurer. These include but are not limited to, sub-contracting with independent agents for placement of business, negotiating commissions, handling claims, issuing policies, processing endorsements, collecting policy premiums or being responsible for completion of regulatory reports for state or federal agencies.
There are a variety of different life insurance policies available, with different objectives, benefits, and costs, and different ways of marketing these policies.
With simple products, such as term life insurance, the direct response system is the most cost effective for the consumer, because the marketing of such products is much cheaper than using an agency network and the competition is much greater. Direct response marketing solicits business through advertising through traditional media, by telemarketing, or by the use of the Internet. The Internet makes its especially easy for consumers to compare policy benefits and prices, especially at the many sites devoted to comparing insurance prices.
For the insurer, the direct response model allows the insurer to sell to a much larger population than would be feasible using agents, and for much less money.
The nonbuilding agency system uses independent agents who are already selling life insurance, sometimes referred to as personal-producing general agents. The insurance company hires the agents as independent contractors through contract and pays the agent above average commissions in exchange for a stipulated minimum of business. These agents are not required to hire and train new agents for the insurer so they can focus specifically on selling. If the insurance company wants to expand the number of agents, it simply hires more independent agents.