Pooling your book of business with other agents' books to increase buying power may sound appealing, but is the opportunity a good fit?
Independent insurance agents see the potential of a rewarding career with high earnings. However, unlocking that potential can be tough. The truth is, there's a lot of competition out there, and it can be difficult to gain access to the best insurance carriers and product lines. Success is possible, but you might need some support to find it—and some agents find that support in insurance clusters.
Identifying an insurance cluster can be tricky for one simple reason: They might not use the term “insurance cluster" to identify themselves. This means that you must look at how the organization is structured to determine whether it's a cluster, aggregator, or agency network. Generally, if agents are pooling their books of business with other agents' books to increase insurance buying power, you're dealing with a cluster.
This might sound appealing to you. However, if you are interested in joining an insurance cluster, you need to assess your situation to find the best insurance cluster for your needs—or whether any insurance cluster is truly the best option.
The best cluster for one agent might not be the best cluster for another. Before you join, you should ask these eight questions to decide if it's a good fit:
1) What are the financial requirements? One of the first—but certainly not the last—questions you should ask is about the financial requirements to join. You need to know what fees you're going to have to pay, either up front or later, to help pay for shared services. Also, find out what commissions you'll be getting, how the accounting works, and whether you're happy with these arrangements.
2) What are the production requirements? You want to grow your business, but you need to make sure the cluster's production requirements align with your capabilities.
3) What else is needed to join? This is your career, so you have a lot on the line. If you're going to combine your book of business with a cluster, find out exactly what that means. Make sure you understand how it is structured and what your role and obligations will be:
- What are you giving up?
- What are you gaining?
- Do you have to change the name of your agency or give up any other rights?
4) Where does the cluster operate? Many clusters are regional. If there's a great cluster that doesn't operate in your area, it's probably not the right cluster for you.
Also, consider what happens if you move outside of the area of operation. You might not plan to move now, but that could change a few years down the road. Joining an organization with a wider reach may be in your best interest long term.
5) Which products and carriers will you be able to access? Joining an organization can give you access to insurance carriers and products you couldn't access on your own, but this isn't a given. Find out which products and carriers you'll gain access to. Look at your agency and ask:
- Does the group provide access to the insurance carriers and products you want—and the ones your clients want?
- Do you already have access?
- Can you write both personal and commercial lines?
- Are there any niche-specialty carriers?
These are important considerations that will impact whether the arrangement actually helps you grow your business.
6) What other support is provided? Independent insurance agents often need help with marketing, licensing and compliance issues. They may also need help with difficult cases. Find out what support you'll be getting when you join a cluster and make sure it's the support you actually need.
7) What if you want to leave the insurance cluster? You always need an exit plan. When you join a partnership, you hope it will last a long time. The reality, though, is that relationships sometimes sour. You may become unhappy with the organization and need to sever ties, or you may simply find a better opportunity that you can't afford to turn down. Regardless of your reason for leaving, you need to make sure it's an option.
Find out what happens if you want to leave. Can you take your book of business with you? Are there other restrictions or time restraints? No matter how happy you think you'll be in the organization, play it smart and make sure the termination terms for the relationship are reasonable.
8) Is an insurance cluster really the best option? What if there aren't any clusters that exactly meet your needs? What if you're unhappy with the support provided, the access to products or the requirements for joining or leaving?
In that instance, don't worry. You have other options. If you aren't happy with the requirements of an insurance cluster, you should consider joining a network instead. Insurance networks provide independent agents with access to the support, carriers, and products they need while enabling them to remain truly independent.
Carol Drake is vice president of corporate strategy at Smart Choice. Drake is primarily responsible for working with Smart Choice's carrier partners to design strategies that maximize profit for both agencies and carriers. Drake has an extensive background in insurance including roles at The Midland Life Insurance Company and Grange.