Typical Fee Structures for Insurance Clusters

October 3, 2016
By: Voldico

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

Insurance clusters (networks, aggregators, etc.) can be great choices for independent insurance agents. This holds true for newer agents who are trying to get started and established agents who are looking to expand their business. 

Insurance clusters 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
  • Sometimes agency startup financing

Naturally, getting those kinds of benefits can be extremely helpful for agents who want to see higher levels of career success, on a faster timeline. But these benefits do come at a cost. It's important to understand what kinds of costs insurance clusters have, so you don't end up getting involved in something that's going to be more expensive than you expected.

You join a cluster to increase the success of your business – too many expenses could put that at risk. But if you choose a cluster that doesn't offer enough benefit, just because it costs less, that might not actually give you the help you're looking for. Balance is the key, when selecting the right cluster.

Many clusters charge fees for access to their benefits, which can vary from cluster to cluster. Here are six typical fees that you should keep in mind when reviewing your options, so you can decide on the right insurance cluster for your needs.

The Six Most Common Fees

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

The following six fees are the most common ones for insurance clusters to charge. While some charge only one type of fee, many clusters charge some 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. Because fees can add up quickly, you don't want to overlook anything before agreeing to sign up.

  1. Initiating / Joining Fees. Most insurance clusters and aggregators charge an initial startup fee or joining fee (which is often thousands of dollars) to become a member. These fees can vary dramatically, and most clusters do not post fee structures on their website. You'll have to actually call or meet with them in person, to find out how much their sign-up fee is.
  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. A commission-based option can be a great way to only pay what's fair for your level of success.
  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. Some contracts even 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, which can help protect agencies from being locked in with a cluster.
  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 have fees if they have a lot of perks.
  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. See what our current members are saying about Voldico.