In today’s market, running your own agency can be tough. The insurance industry has become increasingly competitive, and while there are many benefits to becoming an independent agent or starting your own agency, when you finally make that leap, you might feel lost. You no longer have the resources and infrastructure that comes with working in a large agency and are left juggling many moving parts.

Aggregator insurance companies and insurance cluster groups are solutions to the numerous issues you’re facing. Everything from a boost in marketing to streamlined technology solutions are at your fingertips when you join forces with other independent agencies.

What Are Insurance Cluster Groups?

What is an insurance cluster? An insurance cluster is essentially a network of insurance aggregators or insurance alliances composed of independent agencies working together to provide members with a variety of benefits. These clusters accept both new and experienced agents in the field, and work as a network of support.

A key difference between an insurance cluster versus an aggregator is that aggregators aggregate in several markets, meaning an agent would need to join the aggregator to have a vested interest in the agency. Aggregators seek to roll the premiums of a specific market, whereas clusters join to form a larger book of business and improve profit sharing within the market.

Advantages of Joining an Insurance Cluster

There are several, unique benefits of joining an insurance cluster. If you’re looking to expand your understanding and uncover what is possible with these groups, we’ll dive into the pros (and cons) of insurance cluster membership.

Maintaining Autonomy

Chances are, you transitioned into becoming an independent agent for the benefits of freedom. Joining an insurance cluster does not mean you need to sacrifice your autonomy, because it’s not a merger or acquisition. 

Your independent agency remains independent, you continue to operate under your same company name and appointments, and you still receive your commissions directly. In most cases, you even retain your current marketing and underwriting contracts!

Sales and Marketing Support

Joining an insurance cluster allows you access to top-tier marketing and sales support. Many networks provide full operational support, which can include:

  • Data entry
  • Claims services
  • Profit and loss reports
  • Payroll system management
  • Accounting
  • Management services
  • Acquisitions and conversions strategies

Other supports and services offered by insurance clusters can include direct-mail campaigns, sales tools and coaching, and shared-services. These support structures and features can make your smaller or newer agency operate like one that has been established and running for decades.

Networking Opportunities

Many insurance clusters create opportunities for members to engage in networking events, such as user groups, annual meetings, and even conferences. This allows you to network with other agents, network staff members, and carrier representatives. By having access to other agency owners and independent agents, you have the invaluable resource of mentors, friends, and opportunities for merging your agency. 

Disadvantages of Joining an Insurance Cluster

Every rose has its thorn, and insurance clusters are no different. Let’s explore two of the potential downsides of joining a cluster:

Fees and Penalties

If you’re a newer agent or recently transitioned to becoming an independent agent, getting your feet planted financially can be challenging. You may need to carefully consider your budget during this time, and joining a cluster can come with a plethora of upfront costs, including initiation fees and ongoing fees, such as monthly and maintenance fees. There can also be penalties for not reaching certain monthly or quarterly goals.

When shopping for a cluster, ask about exit penalties, who owns the book of business, and the rate at which base commissions are paid to you. You should also ask:

  • Is profit sharing shared back with members?
  • How is the cluster performing with its top carriers?
  • Will operating margins change because of shared commissions?

Restrictive Separation Options

The majority of clusters will either take over all or some portion of your book of business and/or charge large exit fees for leaving the cluster. At Insurance Pro Agencies, we treat members with dignity and respect, allowing members the ownership rights to their book of business, and members have the option of exiting our group with their book of business in the future.

The Bottom Line

Insurance clusters offer a great deal of benefits that strongly outweigh the cons. If your agency needs a boost, professional collaboration, or resources to take it to the next level, contact us today at Insurance Pro Agencies!

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