Independent agents usually have a hard time getting access to the products they want to sell, because carriers have requirements of hundreds of thousands of dollars in premiums. Joining a cluster is a quick and easy way to gain access to products and commissions that insurance carriers reserve for large agencies.
There is strength in numbers in the insurance industry, and an insurance cluster may offer some answers to a small independent insurance agency trying to grow.
Read on to learn more about what insurance clusters are, how they differ from insurance aggregators and insurance networks (hint: they don’t), how much it will cost you to join, and what you can expect in return.
While insurance cluster groups are not for everyone, maybe they are the solution you need to grow rapidly and take your independent agency into the next level.
What is an Insurance Cluster?
In the simplest terms, an insurance cluster group is a group of insurance agents who decide to put their books of business together to improve their standing and leverage with insurance carriers, and to help each other.
There is strength in numbers, and an agency network or cluster can also support and help each other grow in many ways: profit sharing, dividing expenses among many, supporting each other with training and advice, and more.
What are the Advantages of Joining an Insurance Cluster?
- Access: You can get products that were out of your reach, better commissions, and better market access thanks to your new network of colleagues.
- Lower expenses: if all members share the cost of things like customer service and agency management software licenses, everyone’s expenses go down.
- Easier to merge, buy or sell: since you will be working with many other agents, it will be easier to get to know them well enough so you can make decisions when the time comes to merge, acquire, or step out of the insurance industry.
What are the Costs of Joining?
Costs and fees vary from cluster to cluster and it can be complicated. Some groups, like us, charge a transparent start-up fee. Some groups, on the other hand, forgo direct charges to their member but more than make up that revenue through less-than-totally-transparent indirect costs.
Again, some clusters charge monthly fees, while others charge a percentage of your commissions, and some collect both a monthly fee and a percentage of commissions. Percentages retained may vary according to many factors - depending on the length of your tenure with the cluster, for example.
There may be maintenance fees on the side to cover shared expenses such as training; service centers; office spaces and facilities; shared marketing efforts; and the like.
Many insurance clusters charge elevated exit fees to discourage members from leaving and reduce churn. Make sure you ask and know about all of the fees involved with any particular cluster before signing in - you do not want to be surprised with hidden fees once you’ve signed your agreement and entered the group with your book of business.
What are the Differences between Clusters & Aggregators?
I wish we could tell you that clusters do one thing and aggregators do another, while networks are a completely different thing… but the truth of the matter is that all of these names are often used interchangeably in the insurance industry.
This doesn’t mean that all insurance aggregators, networks, and clusters work the same way, though - each one has its goals and priorities, and each engages its members in a different way. You will have to do your research and ask around in order to find the one that suits you best and has the best tools for achieving your goals.
For example, some groups, like SIAA, will allow you to keep full ownership of your portfolio and contracts, while others may acquire an equity interest in your agency. If that’s the case, it will be complicated if you decide to leave, since you will have to regain ownership of your portfolio and may have to “buy it back” in certain cases.
Some clusters block your access to the carriers they provided you if you decide to leave the cluster. Or require that commissions are paid to them and not to your agency. Neither of these is true with SIAA.
Should You Join an Insurance Cluster Group?
This is a question that only you can answer, ideally after doing your due diligence and researching several clusters and networks.
Insurance cluster groups can be especially helpful to agents and business owners in these stages of their business:
- An agent that has recently decided to go independent, and is now trying to find their footing and grow their agency. They could benefit from advice from senior members, the respectability that comes from being part of a large and established organization, and the increased clout with carriers.
- An established agency owner who wants to grow their agency, either to sell it or just to solidify their market share and eventual legacy. They could benefit from shared services and features such as training, service centers, insurance agency management software, and a network of peers with whom to discuss issues and learn.
- Someone who is looking into Mergers & Acquisitions (M&A), either seeking to buy agencies to incorporate into their own, or to sell theirs in order to move on to something else (retirement or a different industry). They will benefit from the transparency and relations built with other agencies, which will allow them to make smart investment decisions or to approach the right buyers if they seek to sell.
- An agency owner who is looking to increase their revenue through higher commissions, profit sharing, and bonuses. Agencies that join SIAA will be part of the 5 ways SIAA helps its members increase their revenue.
Is SIAA an Insurance Cluster?
SIAA is not a cluster, network, or aggregator - SIAA is a nationwide alliance of 48 Master Agencies, each of which operates in a geographical region. A member of any of these master agencies also gains access to all the benefits of being an SIAA member, while also having localized support, advice, and training from their Master Agency.
Each Master Agency serves independent insurance agents and agencies in their area, giving personalized and area-specific support within the framework of a national alliance. Some of the ways in which Master Agency staff support SIAA members are:
- Helping you place business with SIAA’s strategic partner insurance carriers
- Offering local incentives (tailored to your business, area, and culture) along with profit-sharing
- Supporting you in your business planning process, if you have just set out as an independent or are suffering from growing pains
- Assisting you in perpetuation planning, which is as complicated as it sounds. A little help goes a long way, and these folks have experience in this area.
The alliance system gives you access to the massive benefits the SIAA has to offer, while also giving you personalized and localized support through keeping in close contact with your regional Master Agency.