Many independent insurance agents, both new to the industry and established agents, at some point find themselves asking the question: “Should I join an aggregator or agency network?” Independent agents aren’t tied down by the restrictive contracts and obligations that captive agents are – but they face their own set of challenges as an independent business owner. This ongoing blog series investigates both benefits and drawbacks of agency groups.
Drawback #1: Membership fees
Agency networks exist because there are many insurance agents who need access to markets for their customers. The networks provide a service, and have to be compensated in some way to make money and stay in business. Therefore, they charge fees to the agency owner in exchange for access to markets. For an agency owner who’s just starting out in the industry and needs markets, but has little profit and cash-flow, this can be a problem. Agency networks typically charge fees in one of three ways: Monthly membership fees, initial start-up fees, or commission splits.
Some agency networks charge agency owners fees in MORE than one way, requiring a start-up fee, a monthly fee, AND a commission split on business written through their program. While others only charge a commission split. The commission split charge in some networks is taken on income earned through the carriers the agent accesses through the group, and/or on the commissions agents earn on the carriers with whom they have a direct appointment.The agency owner must investigate the contract of each agency network, and decide which network offers them the best markets for the littlest cost.
Build Your Insurance Agency On Your Schedule By: Michael Miller, Smart Choice® State Director
Building an insurance agency is challenging, whether you’re a new insurance agent just starting out on your own or a seasoned agent adding a new line to your agency’s offerings. Developing relationships with carriers takes time and effort. Joining a cluster group is an effective way to fast-track those relationships and gain access to markets that you could not on your own.
But becoming a member of a cluster group can present its own set of issues. Some charge fees for starting and maintaining your membership. Others require agents to share a large portion of their commission, bonuses, and other supplemental compensation.
Often, cluster groups require agents to make a minimum monthly commission with carriers. But savvy agents know that not all months are created equal in the insurance business. Sales can fluctuate month-to-month and quarter-to-quarter. Requiring agents to meet monthly commission requirements can be unfair and unrealistic.
Smart Choice® Agents understands that not all agents have the same sales goals. Some are go-getters trying to maximize monthly sales, while other choose to grow more slowly. That’s why we do not require our agents to meet or exceed monthly commission goals. Our agents have the opportunity to make 100-percent commissions and keep all the supplemental compensation, bonuses, and trips they earn.
Whether you’re hoping to build a million-dollar agency in less than a year or slowly build your commercial insurance offerings in 2016, choose your cluster group wisely.
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.
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.
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.
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.
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.