August 10, 2020
3 min read
If you are starting out as an independent agency, you may have noticed that it’s difficult to have access to certain carriers or products, because the insurance companies demand minimum premiums and other metrics that you have not reached yet.
There is strength in numbers, and insurance clusters were created precisely to help smaller independent insurance agencies overcome this problem, by presenting a united book of business that will give them better leverage to negotiate with carriers.
Is there a difference between an insurance aggregator, an insurance cluster, and an insurance network?
There are many differences between insurance clusters and carriers, but the difference is not in the name. These names (insurance cluster vs aggregator, and all the others) are used pretty much interchangeably. The differences are internal: each group of insurance agents and agencies operates according to the needs and priorities of its members and leadership.
For example, some clusters may join forces strictly to get access to insurance products but operate independently otherwise. Others, like OAA, are more of an all-inclusive system to support independent insurance agencies and help them grow through mentoring, training, profit sharing, and more.
Benefits of joining an insurance aggregator
Like we said, not all aggregators are created equal, but many offer a number of benefits to their members, which may include:
- Access to insurance carriers that were out of your reach before, since showing a united portfolio will make them treat your group as a larger entity.
- Beyond access, joining a cluster will also give you better leverage to negotiate with insurance companies, which will help you get better commissions and a more favorable profit-sharing deal, among other perks.
- Larger clusters, like OAA, will have training and mentorship programs, so newer agent owners can catch up on their management and leadership skills, as well as getting training for their staff.
- Interacting with other insurance professionals can lead to future partnerships, mergers and acquisitions opportunities, and generally to feeling more supported and having peers to bounce ideas from.
- Some clusters also share expenses such as comparative rating software and agency management software, so each member spends a lot less.
What you need to know before joining an aggregator
If everything sounds interesting, and you’re seriously considering joining an insurance cluster, remember to do your homework first: read reviews, talk to current and past members, ask about all fees and commissions involved. In general, make sure you know at least the following:
- Get a detailed list of all carriers handled by this cluster, and make sure you will have access to all the ones you want from the start. Make sure they are available in the states you want to work in.
- Don’t sign anything without understanding clearly the exit process. Some clusters are rather hard to leave.
- Get a clear idea of all fees involved. Are there start-up fees? Monthly fees? A percentage of commissions? How much? Insurance clusters are for-profit entities, so there will be a price to pay, and you don’t necessarily want to join the cheapest one. Get your information and make an informed decision, and don’t forget you get what you pay for.
- Different clusters have different levels of engagement. While some allow you to retain complete independence, other groups mesh portfolios and share ownership. If independence is a must for you, ask until you get all the answers you need.
- Profit-sharing is a big perk of joining a cluster. Ask about profit-sharing conditions, and about how yours will be protected from other members’ losses.
Joining an agency network, aggregator or cluster can really help your agency grow and thrive. Do your research and decide wisely. OAA is the largest Master Agency in SIAA, we have years upon years of experience nurturing independent agencies and helping them grow into million-dollar businesses. Contact us and find out how you can grow with us.