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

October 11, 2022

In an Insurance Networks Alliance (INA) study conducted in 2022, a reported 22,000 agencies are part of a network, cluster, aggregator or agency alliance, and there are over 150 types of these groups that exist in the industry.

What Is an Insurance Agency Cluster?

There are a number of terms, such as aggregator, network, alliance, and more, that are typically used interchangeably amongst independent agents to refer to cluster groups. 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 and agency alliance groups give independent agents power in numbers — a group of agents has more buying power than a single agent alone, leading to increased profits through things like contingency and bonus qualifications, and higher negotiated commission rates. 

In a recent poll of insurance networks and alliances, 81% reported charging agencies some type of membership fee to take advantage of these benefits.

Here are some of the more common cluster group fees:

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1. Start-up or Initiation Fees.

Many clusters, networks and alliances charge fees — often thousands of dollars — to join their organizations. According to the INA survey, 52% imposed initiation fees, and 7% charged renewal fees. These fees can be a barrier for many new agencies because of the steep initial cost involved, and when you can least likely afford to spend money. Also, although technically not a “fee”, some cluster groups require that you give up an ownership stake in your agency — so watch for that too. To save money, look for a partner with no start-up fee.

2. Monthly Fees.

Close up photo of 50 and 100 dollar bills.

A cluster or network group’s monthly fee, much like a marketing fee involved in a franchise, could require paying a set rate every month, no matter how much you’re earning. 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. Look for a group that has a fair fee structure — one that only requires you to pay a commission portion on the business written through their network.

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 — similar to a buyout. The INA survey revealed that nearly 20% of clusters and alliances charged exit or separation fees when a member agency decided to leave the network. Add this fee to your list of things to look for when you’re evaluating a partnership.

Is an Insurance Cluster Group Right for you?

Apart from fees, is an insurance cluster, network, or alliance right for your agency’s own, unique situation? Make a list of the things you need to make your agency thrive. Often when agencies are first getting started, profit margins can be slim, but they need access to quality markets. Evaluate the cost of getting involved in a cluster group against what you’ll need to grow and be able to serve customers. A cluster, network, or alliance should only charge you for services and goods directly provided to you, so avoid arbitrary fees if possible.

Smart Choice is an agency network offering independent insurance agents access to the top-rated carriers, marketing resources, and expertise they need to grow — all with no fees. Agents that want to utilize our Smart Start program will need to use one of our approved raters. Ready to become a Smart Choice partner?

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Originally published October 26, 2015.

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