Insurance Cluster Groups, Aggregators, and Networks — Which Should You Join?

June 11, 2021

Insurance clusters, aggregators, and agency networks are three options for independent agents that each offer their own unique advantages. However, there are some distinct differences to take into consideration when deciding to join any of them.

Why Join an Insurance Cluster Group?

Deciding to join a cluster group would be an ideal choice if your goal is to align a single market, like coastal, with other agents that have the same market in order to meet growth, loss ratio, and profitability goals. If you have no desire or need to access any other type of assistance beyond the market you’re seeking via the group, a cluster may be the right choice.

Conversely, the cluster’s structure may pose some challenges such as how accounting is handled and establishing a fair and equitable position for each member — especially when some agencies in the cluster may have a more established position already.

What about Insurance Aggregators?

Aggregators are similar but often work with several markets. If you’ve built a decent book of business with a carrier or market and are simply looking to increase your chances to earn higher profit shares by combining your premiums with other agencies, an aggregator is an obvious choice. Joining an aggregator and having the prestige of a larger book will help you be able to negotiate with larger carriers for better premiums and new appointments. Most notably, with both clusters and aggregators, agents must have something to bring to the transaction before ever engaging with the group. 

Insurance Agency Networks and Their Advantages

If you’re looking for a partner that can scale their level of support to match the individual needs of an agency and negotiate on your behalf, a network is probably the way to go. An agency network gives you:

  • Access to a wide variety of different markets
  • The opportunity to get you appointed with carriers
  • The chance to aggregate the current business you may have
  • Other tools to help you establish your agency, like marketing and continuing education
  • Access to dozens of local and national markets
  • Advice on how to navigate the independent agency world to maximize revenue opportunities

Even if you’re a relatively new agency, a unique benefit of some networks includes the ability to evolve in the growth process through programs. Agencies who don’t quite qualify for a code are able to write business through the network’s major carriers via an in-house underwriting team until a code is awarded.

Conversely, a broker or wholesaler can also provide market access in many cases but will not look to enable or assist the agent in moving that business to a sub-code in the agent’s name. The agent will be building up value for the broker/wholesaler but never growing their own agency valuation. So, a network really works on behalf of the agent to help them grow their book and agency valuation.

If it’s a good network, they should be working on behalf of the agent, but not take any ownership or stake in the agent’s business. The agent is free to choose which network support and services they want to utilize, but don’t have to use anything. You are not held captive. You choose the resources your agency needs to match your own vision. 

What Will Be a Good Fit?

Handshake to represent a good fit between independent insurance agents and the agency network they select to join.Independent agents have distinct advantages in the insurance world over their captive counterparts. Their ability to deliver custom insurance solutions at the best price sets them apart with their clients. However, they also face the same main challenge — growing enough to satisfy the requirements of top carriers. 

Think about the size and age of your agency. Determine your biggest pain point(s). What resources would ease the burden of doing business and enable you to take your agency to the next level? What is the lowest point of entry into one of these groups that would give you the resources you need to increase your revenue immediately?

When choosing a group, investigate what it will take to join and what steps you’ll need to take if it is not the best fit. You will want to carefully examine your responsibilities to the group and any expectations you will need to meet over the course of the partnership. Above all, make sure you’re gaining a true business partner and that the objectives and goals of the group align with your own vision for your agency. 

Working with an Insurance Agency Network

Smart Choice is an insurance agency network with over 25 years of experience connecting independent agents and carrier partners. Not only do we provide access to top-rated markets and over 100 carriers, but we also support agents through product training, sales and marketing support, and continuing education opportunities. Smart Choice is a good fit for start-up, former captive, and experienced agents looking to grow their book of business.

Become an Agency Partner Today