Insurance Networks, Clusters, Alliances & Aggregators... Is There a Difference?

Posted on 8/14/17 by Voldico

Here’s a hint: the difference is not in the name but in the agreement.

In the insurance industry, agency network groups (also known as clusters, alliances, and aggregators) are formal associations of insurance agencies established to provide “members” with mutual support and group benefits.

They are essentially master agencies, with groups of retail agents beneath them, under one master code.

There are all kinds of agency networks across the U.S. and worldwide. Most carriers now recognize these organizations, further giving sub-codes to their member agencies.

More often than not, a sub-code shows the member agency name, not the master agency name.

A Little History on Insurance Agency Aggregation

The concept of agency aggregation has been around for almost 30 years.

The concept began with some entrepreneurial insurance agencies looking for an organizational structure that could provide greater negotiating strength and increase efficiencies.

The aggregation model allows agency owners to attain sustained growth while remaining independent entities.

As the models evolved, the industry gave the groupings names like clusters, huddles, or networks, and insurance carriers increasingly jumped on board with the idea. As time went on, new structures were born and some existing aggregators created aggregators within themselves.

For insurance carriers, aggregators reduced the number of contracts needed while increasing the number of distribution points.

The pressure for an agency to “get larger or get out” created an environment that fostered the new groupings. Clusters began to take shape and evolve to offer new paradigms for insurance distribution.

So How Do Insurance Aggregators Differ?

There are no two organizations alike. While most provide increased access to markets, they differ in a number of ways.

Initiation and monthly membership fees vary. Profit sharing agreements and contracts are different from group to group. Some groups may include things like E&O Insurance and an Agency Management System. Others may just provide markets and profit sharing.

If you want to join a cluster or network, review the carrier appointments for any group you research to determine if each carrier is going to meet your desired markets.

Today there are hundreds of aggregators representing a wide range of business arrangements, including groups of just a few small agencies to large networks, with thousands of individual entities.

The terminology used to describe aggregators is not always consistent within the industry. Most allow you to remain an independent agent, and those that do, fall into one of the following groups:

  1. Agency Franchise Operations: AFOs offer a franchise arrangement and share revenue, while providing market access. This is a compensation-based model rather than an upstream holding company concept.
  2. Market Access Cooperatives: MACs are the original agency “clusters” where agencies in the cluster retained ownership of their businesses, and thus their name, identity, location and assets. Individual agency volume is aggregated through a master code at each insurer. The MAC may or may not share some ownership of each agency’s book of business.
  3. Agency Platform Operations: APOs have taken the aggregator model to the next step. APOs provide the benefits of the services already discussed for AFOs and MACs plus further agency structure benefits. They set up large automation platforms for agency.
  4. Managed Agency Organizations: MAOs attract large numbers of agents and provide a common management structure for all agent members. Members usually share the ownership of the upstream entity and manage the organization that oversees their agency books of business. MAOs capitalize on the economies of scale that larger distribution entities are attempting to achieve.

If you think a cluster, network, alliance or aggregator is right for your agency, but you are not sure how choose, check out our post on How to Choose the Best Insurance Agency Cluster for You. 

Posted on 8/14/17 by Voldico

Posted in Tips for Agents