Is Your Insurance Cluster Group a Great Partner or a Ball and Chain?

Weights tied to a persons legs
Weights tied to a persons legs

Is Your Insurance Cluster Group a Great Partner or a Ball and Chain?
By: Michael Miller, Smart Choice® State Director

Choosing an insurance cluster group is a lot like choosing a spouse. You hope you’re both in it for the long haul, and you’d like to think that if you put the work in to sign new clients for your cluster group, the cluster group will reciprocate with giving you access to the industry’s top appointments.

You also know that if the relationship doesn’t work out, breaking up with your cluster group can be painful and difficult. That’s why it’s important to take the time you need to learn all you can about a cluster group before becoming a member. Armed with information, you’ll be able to make a better judgment on whether the group will become a great business partner and help you grow—or a ball and chain that holds you back.

Is It All or Nothing?

Some cluster groups require you to use a certain number of their carriers, and many demand that you use only their carriers. This can often mean cutting ties with your current carriers, resulting in lost clients and policies in force.

An all-or-nothing philosophy is not a win-win situation. You should be able to keep all the carrier relationships you’d like and use your cluster group membership to get high-value appointments with top carriers. Reputable cluster groups know they win when their agents are allowed to maintain their current book of business and carrier relationships.

Is Your Cluster Group’s Slice Too Big?

When your cluster group does allow you to keep your existing carrier relationships, they might require you to split your commission with them. This costs you much and only benefits the cluster group. Don’t fall into this trap when researching your options. Reputable groups will never ask you to share your commissions from existing carrier appointments.

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.

Sources:
https://www.agencyequity.com/agencyequity-exclusive/448-what-do-cluster-groups-offer?showall=&limitstart=#.VghiZMtVhBc
https://www.agencyequity.com/component/content/article?id=138:guide-to-starting-an-independent-insurance-agency#.VghicMtVhBe