Typical Fee Structures for Insurance Clusters

October 3, 2016
By: Voldico

Thinking about joining a cluster? Here’s an overview of some of the most common costs of membership.

Insurance clusters (networks, aggregators, etc.) offer membership benefits that often surpass what you can gain as an individual agent, such as:

  • desirable carrier access,
  • competitive commission programs,
  • sales and marketing support,
  • and sometimes agency startup financing.

But these benefits do come at a cost.

Many clusters charge fees for access to these benefits, which can vary from cluster to cluster. Here are six typical fees that you should keep in mind when reviewing your options.

The Six Most Common Fees

All insurance cluster memberships come with some type of fee (or fees).

The following six are the most common. While some charge only one type of fee, many clusters charge a combination of fees. Keep this in mind when you’re investigating which cluster is best for your agency, and be sure to ask about all fees up-front so you can make an informed decision.

  1. Initiating / Joining Fees. Most insurance clusters and aggregators charge an initial startup fee or joining fee (often thousands of dollars) to become a member. These fees can vary dramatically and most clusters do not post fee structures on their website.
  2. Monthly / Annual Fees. A cluster group’s monthly fee could be fixed, a percentage of your commission, or a combination of the two. These fees also vary greatly from cluster to cluster, but can run from less than $100 per month to significantly more, if premium volume is considered.
  3. Commission Fees. Rather than a set monthly fee, some networks or clusters retain a percentage of your commission instead. Others charge a monthly fee and require smaller commission percentages and some contracts have fluctuating percentages, depending on the length of membership and type of policy.
  4. Equity interest. In some cases, clusters assume an equity interest in your agency. For example, the affiliated agency holds the minority share of ownership (often around 40%) and the agency networks or aggregators own the rest. Other clusters allow members to maintain agency independence and continue to own their book of business (and existing contracts) throughout the membership.
  5. 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, but some may.
  6. Exit Fees. What happens if you want to leave the cluster or network? The decision may cost you! Some groups charge members a fee (sometimes large) to leave the organization. Add this fee to your list of things to look for when you are shopping around.

Voldico charges a commission fee only, so members retain full ownership of their agency and can walk away at any time. Instead of charging a flat fee, we’re invested in making our members more profitable.

If you are interested in joining an insurance cluster or network, check out our How We’re Different page for more information.