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

The cases Mr. Coleman cited in the report of poor and unethical management by MGAs did not reflect AAMGA members or brokers, he said.

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

Mr. Coleman told National Underwriter, in a telephone interview, that he has seen numerous cases of abuse of MGA's underwriting authority and instances of broken premium trust accounts?two issues that are highlighted in the report. These instances have made some carriers wary of dealing with MGAs, according to Mr. Coleman.

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

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

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

"Companies are not paying attention until problems arise," he observed, and would avoid underwriting control problems if they closely monitored the relationship.

"I come into the process at two levels in my practice--one is disputes and two is due diligence on MGAs or program managers," Mr. Coleman explained. "When something goes wrong, looking at it two years later, you go in and say, ?It was so clear what was going wrong.' But maybe it was a soft market or maybe they thought everyone 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 and lays out the groundwork insurance companies need to follow when developing their MGA relationships.

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