The Agent-Friendly Contract

Six agency network contract considerations to examine before you sign.

If you’ve ever been stuck in a bad contract, you know how frustrating the experience can be. Maybe you had a gym membership you never used, or a phone plan that ended up costing way more than expected. You thought it was a good deal when you signed up, but now you’re having major regrets.

Now imagine being stuck in a bad contract that threatens your career or the future of your business. When you set out to join an insurance network, aggregator or cluster, you may encounter paragraph after paragraph of boring legalese. Then the real implications and consequences of the contract are revealed, and it’s not at all what you expected.

This is not a situation you ever want to find yourself in.

That’s why it’s important to look for agent-friendly contracts when you consider an agency network or similar partnership. Below are six points to consider when examining the contract of an agency network, cluster or aggregator group, alongside the approach Smart Choice uses in its agency-friendly contract.

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#1 Length of Contract

The Other Way

With many networks, aggregators and clusters, the contract length can be all over the place. Many are long-term, multiyear contracts with an equity position in the agency or a buy-out requirement. If you want to leave, you may have to give written notice to get out of the contract. Some networks even take a part ownership stake in your agency.


#2 Fees

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Some groups have joining fees, some have monthly fees, and some have both. Joining fees can be thousands of dollars – which can be difficult when you’re trying to grow your agency and facing other costs, such as operating expenses, E&O insurance, advertising, staffing, and so on. Monthly fees are usually a flat rate, and they can be several hundred dollars. That can really eat into your profits month after month.


#3 Commissions

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In addition to fees, it’s important to look at the commission split with the network. Commission arrangements can vary. Some groups will do an 80/20, 90/10 or even 100% commission split – but there can be high monthly fees and equity earnings from your agency that offset the “generous” split. Imagine being responsible for paying fees, even if you aren’t actively writing business with the network.

#4 Contingencies and Bonuses

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One reason an agency may choose to join an aggregator or agency network is to pool business to be eligible for bonus and contingency money from carriers. However, the bonus requirements can vary from group to group. Some don’t share at all, and some may only share a small percentage or make it hard to qualify.

No signup fee, no monthly fees — just a commission split with our carriers.

#5 Ownership

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This is a big gotcha. There may be a day when you want out of the group you’ve joined. The terms of the contract will determine what happens to your agency and your book of business at this point.

Some groups take an ownership position in your agency. If you ever decide to leave, you will be forced into a buyout. Depending on the terms of the contract, the buyout might be a flat fee or a percentage. Read the contract carefully and think about what this would mean for you if you ever decided to leave.


#6 Non-Compete Clauses and Exclusivity

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Non-compete clauses are common when joining networks, clusters and aggregators. Groups use non-compete clauses to protect their resources and investments – but an overly aggressive non-compete clause could hurt you. For example, a non-compete clause might block you from any carrier in the group’s portfolio, or from working in the insurance space in the state or region.

Exclusivity is a similar issue, but it can apply while your contract is in force. For example, a contract might require exclusivity and take a commission on everything you write, even if they didn’t help you access that carrier.

You may be able to find groups without a non-compete clause. That may sound great – but watch out! There may not be a non-compete clause because the group takes equity in your agency and requires a buyout.

Your Contract Checklist

We know that reviewing contracts can be tricky. Use this checklist to look for common contract downsides that you might be better off avoiding:

✓ Does the group take an equity position in your agency?
✓ Is it a long-term, binding, and restrictive contract?
✓ Does the contract nickel and dime you with fees regardless of whether you make money?
✓ Is the non-compete clause aggressive and unfair?
✓ Is there a required buyout if you choose to leave?
✓ Is the contract generous with sharing contingencies, bonuses and additional compensation?
✓ Does the contract require an exclusive agreement that takes commission on everything, including carriers you write on your own?

Make sure your agency network is working for YOU, and not the other way around!

There’s no point in signing a contract that doesn’t benefit you. The whole point of joining an agency network is to grow your business – so ask yourself, will the partnership you’re considering help you do that? Besides the obvious – carrier/market access, bonus and contingency benefits – how is the agency network or aggregator working for YOU, and helping you build your agency? The Smart Choice contract benefits you in several distinctive ways besides the obvious carrier access:

  • Diverse, top-rated markets both regionally and nationally: Of course, the number one reason any agent joins an agency network is to gain access to appointments with carriers. As an independent agent, it can be hard to get access to top carriers and products AND be able to satisfy multiple carriers’ requirements. Make sure the network you choose gives you access to all the carriers and product lines you need to grow a successful book of business. With Smart Choice, you get access to more than 100 carriers and 3,000 products in
  • Negotiated production requirements: Smart Choice wants you to be successful – and to be successful you must be able to satisfy clients’ needs and be competitive. That’s why we’ve negotiated with carrier partners to give agency partners a lower (in some cases NONE) requirement than they could negotiate on their own. This enables you to do the right thing for your customers AND benefit your business.
  • Training and Support: Access to carriers and products is important, but you may also need some help figuring out how to navigate each of the different product offerings from your carrier partners. As you build your book of business, you’ll get training, sales and marketing support from dedicated staff in your state. They’ll also help you navigate the ins and outs of running your business, and help you negotiate with carrier reps.
  • Quick Payment: When you’re building an agency, and reinvesting in your business, cash flow is important. You will want to find a network where commissions are paid on schedule and in a timely manner. Smart Choice pays out commissions twice a month, so you aren’t waiting long time periods between each sale.

What’s Required to Join Smart Choice

A contract is a two-way street. Make sure you’re looking both ways. This means you can’t just think about what you get. You also need to consider your requirements and obligations. If you can’t meet them – or if meeting them is going to be a strain on your business – you should think twice about signing up.

The Smart Choice contract stands out as agent friendly because it’s the lowest cost entry point for any agent to gain a substantial amount of support, market access, and other agency services. There’s zero commitment, zero financial strain, and you receive the benefit of a business partner who has the size and clout to negotiate great things on behalf of your agency.

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