Full-stack insurtechs vs MGA models: who carries the risk

A full-stack insurtech is a company that owns the licensed insurer whose name is on your policy, so the premium, the risk and the claim payments sit on its own balance sheet. An MGA (managing general agent) is an agency that sells and prices policies under authority granted by someone else's licensed insurer, and that insurer, not the app, owes you the claim payment. Many digital brands are one, the other, or a blend that changes from state to state, and the only reliable way to know which you are buying is to read the legal fine print and your declarations page.

The difference matters most on the worst day: a disputed claim, a company that cannot pay, or a cancellation you want to challenge. Ratings, complaint records and guaranty fund protection all follow the legal carrier, not the brand. For why the money side of these companies has been hard, see why many insurtech car insurers struggled with losses.

Two jobs that look like one

An insurance policy involves several jobs that a driver never sees separately:

• Distribution: finding customers and selling the policy.
• underwriting and pricing: deciding which risks to accept and what to charge.
• Risk-bearing: holding the capital that pays claims.
• Claims handling: investigating, adjusting and paying.
• Reinsurance: passing part of the risk to other insurers for part of the premium.

A traditional carrier does all of these under one legal roof. "Full-stack" is the industry's shorthand for owning the whole stack. Root, Inc. describes itself in its 2025 annual report to the SEC as "a full-stack insurance company," and says it holds three regulated insurance subsidiaries plus a reinsurance captive in the Cayman Islands. An MGA owns the first two jobs, at most part of the fourth, and little or none of the third.

The legal entity that bears the risk is the insurer or carrier; the one that sells, prices and often services the policy for it is the agent or MGA. Both can use the same app and logo, which is why the brand tells you so little.

What a full-stack carrier does

A full-stack insurtech applies for and holds insurance licenses, files its rates and policy forms with each state, and keeps statutory capital against the policies it writes. Its state regulator examines its finances. Root's 2025 annual report says Root Insurance Company is domiciled in Ohio, that the Ohio Department of Insurance is the primary regulator for two of its insurers and the Florida Office of Insurance Regulation for a third, and that its insurance subsidiaries cannot pay dividends to the parent without regulatory approval. Lemonade's 2025 annual report names Lemonade Insurance Company and Metromile Insurance Company as its insurance subsidiaries.

Full-stack does not mean "no reinsurance." Both companies buy it. Root's report describes using excess-of-loss reinsurance for large losses and quota share reinsurance, which hands a fixed percentage of every policy's premium and losses to reinsurers, partly because it gives a growing company "regulatory surplus relief." Lemonade's report says its insurers cede part of their premiums and losses to reinsurers rated "A" or better by AM Best and to a Cayman Islands captive. The difference from an MGA is that the licensed carrier, not the reinsurer, remains the company that owes you the claim.

Full-stack firms also do not always write every policy on their own paper. Root's report says it routes all of its new auto policies in Texas through an unaffiliated Texas county mutual insurance company, under a fronting arrangement in which Root assumes 100% of the premium and losses on those policies, and that the arrangement gives it "greater rating and underwriting flexibility." Lemonade's report likewise describes assumed premium on Texas car policies written through a fronting arrangement with a third-party carrier there. Both reports were filed in February 2026. A company can therefore be full-stack in most states and a program manager in one.

What an MGA does

An MGA is an insurance agency with extra powers. The National Association of Insurance Commissioners (NAIC) publishes a model law, the Managing General Agents Act, that states use as a starting point. In the October 2002 version posted on the NAIC site, an MGA is a person who manages all or part of an insurer's business and acts as its agent, and who underwrites premium above 5% of the insurer's policyholder surplus in a quarter or year while also adjusting or paying claims above $10,000 or negotiating reinsurance for the insurer. "Underwrite" is defined as "the authority to accept or reject risk on behalf of the insurer." States adopt their own versions, so the thresholds and details vary; the model is a guide to the structure, not the law in your state.

The same model requires a written contract between the MGA and the insurer that spells out who does what. Among the minimum terms it lists:

• Underwriting guidelines set by the insurer: maximum premium volume, the basis of the rates, the types of risks that may be written, maximum limits, exclusions, territory, cancellation provisions and the maximum policy period.
• The insurer's right to cancel or non-renew policies under the state's rules, and to terminate the MGA for cause.
• If the MGA settles claims, timely reporting to the insurer, and the insurer's right to see the claim file when a claim is large, disputed or old.
• A bar on the MGA binding reinsurance on the insurer's behalf, with narrow exceptions.

The model also requires the insurer to keep the MGA's audited financial statements on file. In plain English: the carrier lends its license and balance sheet, the MGA brings customers and a pricing engine, and the contract is the leash.

Mile Auto is a current example. Insurance Journal, reporting in July 2026 on Mile Auto's acquisition of Georgia's Insurance House, called Mile Auto "an AI-driven MGA" and described its pay-per-mile product, and said Insurance House's carrier partner Southern General Insurance Company would continue as an "independent fronting carrier." Mile Auto's own website states that its policies are underwritten by an AM Best "Excellent" rated national insurance company and backed by one of the world's largest reinsurers, without naming either on its home page. The carrier's name usually appears in the policy documents, not the marketing.

Fronting carriers and reinsurance: the capital behind the app

A startup that wants to sell auto insurance faces a wall: it needs licenses in each state, regulators' confidence and enough capital to satisfy risk-based capital rules. A common shortcut is to partner with an established, licensed carrier that lets the startup use its paper. That carrier is a fronting carrier. It issues the policies and stays legally on the hook, and then passes most or all of the risk to reinsurers (and, in some deals, back to the MGA's affiliates) in exchange for a fee. The reinsurance is what makes the arrangement economically possible.

The Texas Department of Insurance describes the pattern in its Private Passenger Automobile Statistical Plan reporting manual, which refers to county mutuals that "sell their paper" to managing general agents. In its words, the MGA sets the underwriting guidelines and rates, lines up a reinsurance program that is usually 100%, and for a fee to the county mutual sells insurance in the county mutual's name; the manual calls these relationships "fronting." The page carries an original-printing date of January 1, 1994 and is still posted on TDI's site, so the structure is long established rather than a startup invention. Texas has a particular history here, covered in our guide to texas county mutuals and fronting carriers: who really insures you.

Fronting has grown well beyond Texas county mutuals. A September 2026 AM Best report, as summarized by Reinsurance News, estimates that upwards of $30 billion of U.S. property and casualty premium was fronted as of year-end 2025. AM Best says fronting was historically used mainly by captives and self-insured organizations to meet financial responsibility laws and has expanded to include MGAs, and that reinsurers have been pushing fronting companies to keep more of the risk themselves so that the MGA's underwriting decisions stay disciplined. AM Best also flags that some of the reinsurance has migrated toward unrated or unauthorized reinsurers, which adds credit risk to the fronting company.

For a policyholder, the point is not that fronting is bad. It is that the name on the app, the name on the policy and the name of the entity whose balance sheet matters may all be different.

Where underwriting authority and claims sit

The practical differences show up in three places. This table summarizes the typical pattern; individual companies vary.

Claims are the part that varies most. Under the NAIC model, an MGA that is allowed to settle claims must report them to the insurer on time, and the insurer can pull the file when a claim is large, in dispute, over the MGA's authority or open more than six months. In practice, some MGAs adjust claims in-house, some hire third-party administrators and some leave claims to the carrier, so ask early who has the authority to change a decision. Our guide on how to research a car insurance company before you buy covers what to look up.

What it changes on your declarations page and in your documents

The declarations page, the summary at the front of your policy, names the insurer. That is the entity whose contract you hold. With an MGA arrangement it may be a company you have never heard of, and the page may also name the agency or program that sold it. See how to read your car insurance declarations page for the layout.

Clearcover shows how much this can vary inside one brand. The footer of Clearcover's website says its policies are underwritten by Clearcover Insurance Company and Clearcover Inter-Insurance Exchange in Illinois. In Texas, it says, policies may be offered and administered by Clearcover General Agency and underwritten by Old American County Mutual Fire Insurance Company, and in California they are offered and administered by Clearcover Insurance Agency and underwritten by Response Indemnity Company of California. The same app, then, can put an Illinois customer under the company's own carriers and a Texas or California customer under a different carrier's paper. The wording above is from the site as of November 2026; footers change, so check the live page and your own documents.

The carrier's name also appears on your insurance ID card and in the fine print at the bottom of the company's quote pages.

Ratings, complaints and guaranty fund protection

Ratings. A financial strength rating describes a specific insurer's ability to pay claims. In an MGA deal it is the carrier's rating that matters, since the MGA is not the one paying. In a full-stack company it is the insurer subsidiary's. Different agencies use different methods, which is why a company can be strong on one scale and not rated on another. Lemonade's 2025 annual report states that its insurance subsidiary holds an "A" (Exceptional) Financial Stability Rating from Demotech, Inc., and that the company does not have a rating from A.M. Best, and it lists that as a risk factor. That is not a verdict on the company; it is a reminder to know which agency issued a rating and what it measures. Our explainer on AM Best financial strength ratings explained and the comparison of Financial strength ratings compared: AM Best, S&P, Moody's, Demotech go through the differences.

Complaints. Because the licensed insurer writes the policy, it is the company regulators track, and the NAIC's consumer search is a place to look it up. The NAIC's Consumer Insurance Search page describes a company search that can return multiple subsidiaries with different names and advises checking the policy for the correct one, and it recommends your state insurance department's website to confirm a company is licensed. The MGA, as a licensed producer, can also be the subject of a complaint to the state. Our guide to what your state insurance department does explains who handles what.

Guaranty funds. If a licensed insurer becomes insolvent, state guaranty associations can pay covered claims up to statutory limits. The National Conference of Insurance Guaranty Funds says associations cover only licensed insurers, that surplus lines carriers and unlicensed companies are not covered by the property and casualty guaranty statutes, that the most common cap is $300,000 per claim (the amount differs by state, and the payout is the lesser of the policy limit or the cap), and that the funds usually act only after a court enters an order of liquidation. The consequence for MGA business is simple: the question is whether the carrier behind the MGA is an admitted insurer licensed in your state. Our article on admitted vs surplus lines insurers: what it means for your protection covers that line in depth, and what happens if your car insurer goes insolvent describes what happens to a policy.

A worked example, with made-up numbers

Say you pay a $1,800 annual premium to a digital brand that is an MGA. These numbers are hypothetical and only show how the money might be divided.

• The MGA keeps a commission of $270 (15%).
• The fronting carrier keeps a fee of $90 (5%).
• The remaining $1,440 goes to a reinsurer.
• When you claim $9,000 for a collision, you deal with the MGA's adjusters, the carrier issues the payment, and the reinsurer later reimburses the carrier under the treaty.

Now suppose the reinsurer fails. The carrier still owes you $9,000. Whether it can pay depends on its own capital, any retained share of the risk and the credit quality of its other reinsurers, which is why AM Best's concern about unrated reinsurers, discussed above, is aimed at the fronting company. You cannot see the commission and fee split. You can see the carrier, its rating and its license.

How to tell which model you are buying from

1. Read the footer. Search the quote page for the words "underwritten by," "issued by" or "insurance policies are." The company usually states carriers by state.
2. Check your documents after you buy. The declarations page names the insurer. If the name differs from the brand, search the name.
3. Look up the carrier. Use the NAIC Consumer Insurance Search and your state insurance department's license lookup to confirm that the carrier is licensed in your state.
4. Check the rating and who issued it. Look at the carrier's rating, not just the brand's.
5. Ask directly. A scripted set of questions for the company's chat or phone line: - Which insurance company will issue my policy, and is it licensed in my state? - Is the company that sells me the policy the same company that pays claims? - Who adjusts claims, and who can overturn a denial? - If your carrier were to fail, would my claim be handled by this state's guaranty association?

Common questions

Is an MGA less safe than a full-stack insurer?

Not automatically. An MGA's customers are covered by a licensed carrier with its own capital and regulator. The risk is concentrated in the carrier's quality, how much risk it keeps, the strength of the reinsurers behind it, and how well the contract is enforced. A full-stack startup carries all of its own underwriting results.

Why would a company use a fronting arrangement if it has its own license?

Root's annual report gives one reason: flexibility. It says the Texas arrangement allows "greater rating and underwriting flexibility," and that it routes all new Texas auto policies there while assuming 100% of the premium and losses. AM Best's September 2026 report lists multi-year capacity stability and faster product launches as selling points for MGAs. Whether the arrangement benefits the policyholder depends on the carrier's strength, which is why the carrier's name matters.

Does the declarations page always name the MGA?

No. It names the insurer. The MGA or program may appear as the agent or administrator, but the contract is with the insurer. If the page does not make the roles clear, ask the company in writing which entity is your insurer and which one adjusts claims.

Who do I complain to if my digital insurer denies a claim?

Start with the company and ask for the denial in writing with the policy provision cited. If the dispute continues, your state insurance department takes complaints about licensed insurers and licensed producers. For legal disputes beyond that, a licensed attorney is the place for specifics. Our guide on how to research a car insurance company before you buy covers the lookup.

Does a rating on the brand carry over to the carrier behind it?

No. A rating belongs to a legal entity. If the app's own insurer has a rating and the carrier on your Texas policy is a different company, the second company's rating is the one that applies to your claim. Look up each entity named on your documents, and check which agency issued the rating.

Key takeaways

• A full-stack insurtech holds its own license, capital and claims obligation. An MGA sells and prices under a licensed carrier's authority, and the carrier owes the claim.
• Many companies mix models. Root and Lemonade use Texas fronting arrangements, and Clearcover's footer lists different carriers in Illinois, Texas and California as of November 2026.
• Fronting carriers and reinsurance are the capital behind many startups. AM Best's September 2026 report says upwards of $30 billion of premium was fronted by year-end 2025.
• What protects you is the licensed carrier named on your declarations page: its license in your state, its rating and its eligibility for guaranty fund protection.
• Before you buy, find the "underwritten by" line, confirm the carrier's license with your state insurance department, and ask who handles claims.