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.
These organizations can offer a great way for newer agents to get started in their careers, because insurance aggregators and clusters can give them access to bigger carriers and more resources. But insurance aggregators and clusters can also help established agents work together and pool their resources to reduce costs and add value.
When agents work together they frequently get more done, and they're better able to expand the options they offer to customers, as well. By doing that, they'll be able to grow their agencies through collaborative efforts.
Insurance Aggregators and Clusters Are Not New
The idea of agency aggregation has been around for almost 30 years. It 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, and the customers of the agencies have more options through direct carriers who work with the agencies, as well. Small agencies and new agents might not otherwise be able to get access to more carriers and resources for their customer base.
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. While it was intimidating to some agents at first, many quickly saw the value being offered and joined up.
So How Do Insurance Aggregators Differ?
There are some big differences between insurance aggregators, and it's important for the insurance agent who's thinking of signing up to do their research before agreeing to a contract. When you do that, you're protecting yourself and your customers.
While most insurance agency networks provide increased access to markets, each organization will have differences in other ways, with the two biggest differences being:
- Initiation and monthly membership fees
- Profit sharing agreements and contracts
So if that's an aggregator, what's an insurance cluster? The terminology used to describe clusters is inconsistent within the industry. Most allow you to remain an independent agent, and just join up with the cluster. In some ways, clusters are less inclusive than aggregators.
That generally means you'll be more independent, but you can still get access to important resources. You'll also likely have fees to pay, so you want to look over any contracts carefully. The clusters that allow you to remain independent fall into one of the following groups:
- Agency Franchise Operations
- Market Access Cooperatives
- Agency Platform Operations
- Managed Agency Organizations
If you think a cluster, network, alliance or aggregator is right for your agency, but you are not sure how choose, it's important to take some time before making a decision. Additional knowledge is rarely a bad thing. To find out more, check out our post on How to Choose the Best Insurance Agency Cluster for You.