Everything You Need to Know About an Insurance Cluster

The insurance industry is a great platform for professional growth but also comes with its share of challenges. Setting up and running an agency is not an easy task. When an agency isn’t performing well, it could be forced to close its doors permanently. In such cases, independent agents will need to consider alternatives to survive. One of those is to join an insurance cluster.

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What Are Insurance Clusters?

As a whole, an insurance cluster is a group of agents, brokers, and agencies that have joined together to provide each other with certain benefits and support. With an insurance cluster, members can merge their books of business and improve each other’s standing with insurance carriers. The objectives of a cluster are as follows:

  • Better utilization of personnel, existing resources, expenses, and automation.
  • Develop profit-sharing agreements and influence.
  • Create new platforms to innovate and launch new insurance products and services.

    According to Deloitte, there are times when you may not able to keep up with the demands of the insurance industry. Situations such as a worldwide pandemic can definitely hinder the services that you provide. Moreover, you may not be able to deliver the top-notch service to your clients that you know you could if you had more resources.

    As an agency owner, you have to manage agents & employees, identify leads, watch out for market trends and look after business operations. The list of things that need to be accomplished is quite long, and finding the time for it all can be challenging.

    By being part of an insurance cluster, you can receive help from your fellow peers, combine resources, and collaborate with other members when needed.

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    Benefits of Joining a Cluster

    Being a member of an insurance cluster has the following benefits:

    Better Access to Carriers

    By joining a cluster can help your agency gain access to various carriers. This results in more products, options, and savings for your clients. Additionally, some carriers can also offer better commission rates for cluster members. With this, your agency can increase its revenue without taking in additional work.

    Profit Sharing

    Some insurance clusters offer profit sharing to their members. This can be a great incentive for associated agents to increase revenue. Members who are part of the cluster can subsequently earn more this way than they previously could.

    Save on Operational Costs

    Clusters tend to pool all their expenses related to marketing, consulting services, and insurance technology. Individual agencies that operate on their own would have higher expenses if they were to work the same way. According to Docker COO Scott Johnston (via TechCrunch), businesses spent around 80% of their IT budgets just to maintain legacy systems.

    Thus, by being associated with a cluster, you benefit from resources similar to that of a larger insurance company and save money.

    More Opportunities

    With insurance clusters, your agency can experience a cost-effective way to explore innovative product lines or markets. This benefits small agencies as it is better for them than operating on their own. Many agencies look towards joining a cluster to provide themselves with additional time, personnel, and resources to grow quickly.

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    Fees Related to Insurance Clusters

    Joining a cluster is a great way to further develop your insurance agency. You gain access to carriers that would otherwise be off-limits to you on your own. Additionally, you also benefit from the resources that are shared between members.

    However, joining an insurance cluster comes at a cost. Many clusters charge their members various fees in order for them to take advantage of the benefits they provide.

    Here are some of the common fees associated with insurance clusters:

    Startup/Initiation Fees

    Cluster groups tend to charge initiation fees to join them. New and upcoming agencies can see these as a deterrent, but some cluster groups do not charge any startup fees. These usually range from a few thousand to tens of thousands of dollars.

    Monthly Fees

    Monthly fees for joining a cluster can vary accordingly. Some may opt for a fixed rate, a percentage of your commission, or a combination of both. When you commit to a cluster group and its fees, it is best to review your monthly revenue so that you do not have a hard time paying the monthly fees. These fees can range from less than $100 to over $200. When it comes to paying a certain percentage, it depends on the length of membership.

    Maintenance Fees

    A cluster offers members benefits such as agency management software, advertising, and more. These benefits are usually covered by maintenance fees. However, not all clusters charge such fees, so it is best to ask.

    Exit Fees

    When you wish to leave a cluster group, you will be charged an exit fee. The majority of insurance clusters tend to charge high exit fees to dissuade members from leaving. Do your research about the clusters that interest you and get all the details about their exit charges.

    value insurance cluster

    Should You Join an Insurance Cluster?

    Joining an insurance cluster as an independent insurance agency does not mean that you have to give up the way you work. You can still work independently, but get additional benefits from fellow members. As a whole, being part of an insurance cluster means that you are exploring a chance to grow your business, increase your customer base, and take part in new opportunities.

    Hope our blog was useful to you. Do let us know your thoughts in the comment section below.

    Also, do spare a few minutes learning about our agent directory!

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