Insurance Cluster Pros and Cons

May 2, 2016
By: Voldico

Is joining an insurance cluster or network the best solution for your independent agency?

The insurance industry has become extremely competitive, and many independent agents are overwhelmed with trying to manage all the moving parts of their agency. 

Getting customers, building loyalty, and providing options are tablestakes for today’s successful agencies, and some agents are struggling to keep their heads above water.

If you want to remain in business for years to come, your agency should run like a well-oiled machine, not a bottleneck. 

With the membership benefits of a top-notch insurance cluster, you can focus on selling insurance and providing outstanding customer service, without losing your status as an independent agent.

Insurance Cluster Pros

There are many pros to joining an insurance cluster. Depending on your desired business model, there are also some cons as well. 

We have removed the guesswork by assembling some main points for you to think about, so you don't have to worry so much about making the right choice. Some of the biggest pros to joining an insurance cluster include:

Greater access to desirable carrier markets. Through collective bargaining efforts, networks offer a viable solution for agencies to acquire markets and services through attractive carriers to which they might otherwise not have access.

You remain an independent agent. Though you are joining a cluster or network, it is not like a merger or acquisition. You remain an independent agency, you continue operating under your current company name and appointments, you receive commissions directly from your carriers and you retain your current marketing and underwriting contacts (in most cases).

Access to top-tier marketing and sales support. Some networks, like Voldico, provide full operational support, including payroll system management, data entry, claims services, accounting, profit/loss reports, monthly reports, acquisition and conversions strategies and management services. As of this year, Voldico also offers customer support for its members. 

Networking and information sharing with like-minded professionals. With some insurance networks, you have the opportunity to participate in networking events like conferences, annual meetings and user groups. These are great opportunities to network with other agents, carrier representatives and network staff members.

Insurance Cluster Cons

Just like the pros, there are also cons to joining an insurance cluster. You want to make sure you're not overpaying, and that you're getting the benefits you want, need, and expect. You should feel good about the pricing structure, and comfortable with the requirements you have to meet.

Before choosing any cluster, be sure you've checked into its leadership, costs, and other factors. Then you can feel good about choosing the best insurance cluster for you. Among the cons you should consider are:

Inferior leadership and direction at the top level. In order for a cluster or network to be successful, the managers and leaders at the top need to work together as a team and make decisions that have the network’s best interests in mind. At Voldico, our leadership team is professional, effective and has many combined years of successful industry experience.  

Membership fees and penalties. Since each network contract is unique, and probably a little confusing, agents must invest the time to understand what they are getting into—in other words, read the fine print! At Voldico, there are zero membership fees. Rather, we only take a percentage of the commissions you make from writing policies.

Lack of common goals and vision among members. When you join a network, you join a partnership, but there is no formal “commitment.” When a network member leaves with their book of business, a void is created with markets and/or shared expenses. This could be fatal to a small cluster or network. It is important that all members share a common vision for the cluster and are willing to put in the time to make it succeed.

Separation challenges. Walking away from an insurance network can sometimes be difficult. In fact, it is the number one challenge reported by industry experts and agents involved with networks. At Voldico, you can cancel your contract at any time with a written notice and you will never be subject to any fees for leaving.

When making a decision to join a cluster or network, know that Voldico offers the same membership benefits as our competitors and then some. Here is how we measure up against the competition.

To learn more about insurance clusters, check out our blog post Insurance Clusters 101 or if you would like more information about joining Voldico, get in touch.