4 Insurance Cluster Group Fees Explained…And How You Can Avoid Them

Pile of Money
Pile of Money

4 Insurance Cluster Group Fees Explained…And How You Can Avoid Them
By: Michael Miller, Smart Choice® State Director

Joining an insurance cluster group is a great way to gain access to appointments with carriers that would be off-limits if you were negotiating on your own. Cluster groups give independent agents power in numbers—a group of agents has more buying power than a single agent alone, leading to more profits.

Many insurance cluster groups charge their members several fees to take advantage of their benefits. Here are some of the more common cluster group fees.

  1. Start-up or initiation fees. Some cluster groups charge fees—often thousands of dollars—to join their organizations. These fees can be a barrier for new agencies. To save money, look for a cluster group with no start-up fee.
  2. Monthly fees. A cluster group’s monthly fee could be fixed, a percentage of your commission, or a combination of the two. Before committing to a cluster group with a monthly fee, take a look at your agency’s past revenue—are some months slower than others? Inconsistent monthly revenue could make it difficult to pay your cluster group’s monthly fee.
  3. Maintenance fees. Maintenance fees cover ongoing benefits the cluster group offers its members, such as advertising and agency management software. Not all cluster groups charge maintenance fees, so do your homework when shopping for a group.
  4. Exit fees. Want to switch cluster groups? That decision may cost you. Some groups charge members a fee to leave the organization. Add this fee to your list of things to look for when you’re shopping around.


If You Don’t Own Your Renewals & Expirations, You Might Get Burned

Financial consultant presents bank investments to a young couple

If You Don’t Own Your Renewals & Expirations, You Might Get Burned
By: Michael Miller, Smart Choice
® State Director

Handling insurance policy renewals and expirations are the bread and butter of insurance agents. But what independent insurance agents may not realize—often until it’s too late—is that though they may own their agency, they may not own the right to renew their clients or requote clients whose policies have expired. Without complete ownership of their books of business, many agents are a lot less independent than they think.

Policies in Force, Renewals, and Expirations

First, some terminology. A “policy in force” is any type of policy—auto, health, disability, life, commercial—that is currently active. If payments are not made on a policy in force, it lapses and becomes expired. Renewing client policies keeps them in force.

As an agent, you’re responsible for the daily management of your policies in force, renewals, and expirations. You market your agency, make the sales pitch, cross sell policies, build the client relationship, send out renewal reminders, and follow up with clients who chose not to renew. After all this effort, you’d expect you’d own your client accounts.

100% Ownership Not Guaranteed

Unfortunately, that’s not always the case. Some carriers and cluster groups retain the rights to renew and follow up with clients whose policies have expired. If you choose to move a client to another carrier or break your relationship with a carrier or cluster group altogether, you may lose dozens—or even hundreds—of clients in the process.

As 100% ownership of your agency’s book of business is not guaranteed, it’s important to do your homework before working with an insurance carrier or cluster group. Ask specifically about who owns the rights to your clients’ policies in force, renewals, and expirations.

Understanding Insurance Agent Commissions

Hands Giving & Receiving Money

Understanding Insurance Agent Commissions
By: Michael Miller, Smart Choice
® State Director

Knowing how agent pay and commission works can be tricky, whether you’re an experienced independent insurance agent, a producer on an agency’s payroll, or if you’re considering making a career change into the insurance industry. Here’s a quick run-down of the different ways insurance agents get paid so you can decide the best option for you.

7th Best Business Job
This year, US News & World Report ranked “Insurance Agent” as its seventh best business job in the United States. Half of the insurance agents in the country are independent, while about a quarter work directly for an insurance carrier as a captive agent.

While some agents are salaried, most earn part or all of their incomes on commission. This means a lot of an agent’s time is spent finding and following up with leads. Without the right support, it can be tough for new agents—or newly independent agents—to make a living off commissions alone.

How Commissions Work
The amount you earn in commission as an insurance agent depends on how much insurance you sell and the type of insurance you sell. An agent selling life insurance, for example, may make between 30 and 90 percent of a client’s first-year premium. Commissions on premium renewals are typically lower. Agents selling life insurance may only make 3 to 10 percent on life insurance renewals.

The commission you earn also depends on the carriers you work with. Some carriers have more generous commissions (and bonuses) than others. Joining a cluster group can help you gain access to some of the industry’s more generous commissions. Members typically split commissions with their cluster group. Each group splits commissions differently, so do your research carefully before you commit.


Tips For Being Your Own Boss

If you own your own independent insurance agency, then at some point you likely decided you wanted to work for yourself rather than for a captive company. Independent agents have to work especially hard to do their own marketing and customer recruiting, in addition to serving multiple other roles in their agency. But any small business owner should abide by some basic rules.

In honor of National Boss’s Day on Friday, here are some tips to be successful at being your own boss, no matter what business you’re in:

  • Do something you love. If you aren’t invested in your work, your business will suffer and cannot possibly be sustained. Make sure it’s something you’re passionate about so you get enjoyment out of building and refining something each and every day.
  • Re-invest in your business. It’s hard enough to maintain a small business on a day to day basis. Once you’re up and running and have a strong client list, you need to take the time reinvest in the places the business is vulnerable. This means education workshops for yourself so you don’t lose your creative spark, business coaching, hiring people to expand, new offices, refreshed website and branding, etc. Take your hard-won earnings and continue to grow and evolve your business!
  • Work a regular schedule. While making your own schedule is certainly one advantage of being your own boss, you can’t expect to run a successful business if you aren’t in it very often. You have to work regular hours to be able to serve customers when they need to be served. Be open. Some local businesses in town are only open three to four days a week and at odd hours that aren’t convenient to many shoppers. Their business suffers because of it. Be available!
  • Take time off. On the opposite side of the spectrum are the business owners who overwork themselves. Treat yourself as you would any normal employee. You can’t expect to adequately serve customers if you’re burned out. Find reliable people you trust to work in your business. Everyone needs good back-up.
  • Value yourself. Most of all, value your time. Use your time wisely. Charge accordingly. Recognize that you’ve worked hard to bring your business to life, and you can’t expect to sustain it without valuing the time and effort you put into it each and every day.