Insurance cluster groups and aggregators are designed to give independent agents or agencies the benefits of larger agencies without sacrificing the autonomy and freedom that encouraged you to leave your larger agency behind.
Chances are, you’ve heard the terms ‘agency aggregator,’ and ‘insurance cluster’ used interchangeably, but they are indeed different. Before you make the leap (and pay those costly initiation fees), it’s important to understand their distinctions. Each offers different benefits and disadvantages, which is why we explore them in-depth in this article.
What Are the Similarities?
Insurance clusters and aggregators are similar in that they describe the action of agents joining together to increase their benefits. Many of the benefits included in joining either an aggregate or a cluster includes:
- Access to a wider range of carriers
- Profit sharing and fixed compensation
- Support with administrative work, including billing and invoicing
- Expert guidance and assistance with marketing and sales
This is just the tip of the iceberg when it comes to the pros of joining either an insurance cluster or an aggregator. These benefits continue to expand, depending on which one you join.
What Are the Differences?
At face-value, the two seem very similar, but there are key differences between clusters and aggregators. In this section, we’ll define both and explore what makes them so distinct when most people tend to group them together.
What Is an Insurance Cluster?
An insurance cluster is a group of agents who form an association or joint venture to aggregate individual books of business with common carriers. The primary purpose and function of a cluster is to generate lucrative contingencies, increase influence, and pool resources observed with other economies of scale–this means a successful insurance cluster requires familiarity and mutual respect amongst its members.
These clusters rely on recognized and agreed-upon responsibilities, expense sharing, and joint decision making. A cluster can improve its standing and leverage with carriers, as well as provide an intimate network for agents to learn from and help one another.
A few key benefits of joining a cluster include:
- Simplified merging, buying, and selling: When you work with many agents, you build stronger relationships with others in your field. This makes decision-making and planning easier when the opportunity to acquire, merge, or even step outside of the insurance industry arises.
- Improved access: When your network expands via cluster membership, you can access resources and products that may have been previously out of reach.
- Expense sharing: With all agents pooling resources, you share the cost of services such as agency management software licenses or customer service. This means your overall costs go down.
What Is an Insurance Aggregator?
By contrast, an insurance aggregator provides market access and aggregate premium without any support services or tools. Agents join the aggregator to gain access to an insurance carrier’s contracts, and it is much more transactional by nature. They seek to roll premiums of a specific market into one ‘bucket’ that allows them to establish additional revenue from the market.
Insurance aggregators veer off from clusters in that they may aggregate several markets; agents who join the aggregator then have a vested interest in their agency. Aggregates typically require agencies to have a certain amount of premium already written through a particular market in order to join. In this way, they tend to be a little more prestigious than clusters, but this isn’t always the case with every aggregate.
Here are a few key benefits of joining an aggregate:
- Expanded market access: When you join an aggregate, you have access to new markets and carriers, allowing you to build a strong book of business.
- Community of peers: Aggregates provide members opportunities for networking, training, joining quarterly meetings, and even joining the advisory committee. You can truly connect and collaborate with fellow professionals.
- Agency growth: With a strong book of business and the networking connections you’ve made, your agency can grow and expand in the ways you hoped it would.
In a Nutshell
Aggregators tend to focus on giving members the scale and financial advantages of working at the largest agencies, while clusters focus on building a solid community of peers to create a streamlined workflow and mutually-beneficial relationships.
Insurance Pro Agencies (IPA) is an insurance cluster group in Illinois, with the reach and resources of a larger agency–without the sacrifice of autonomy from agents. We’ve been in business for more than forty years, maintaining our family-owned principles with the ambitious scope of uplifting agents. Contact us today to give your agency the resources and boost it needs to take you to the next level!
