What’s Included in a Typical Insurance Cluster Agreement?

August 17, 2016
By: Voldico

Every cluster agreement is unique. But there are common threads that run through most.

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. 

A cluster or network is essentially a master agency, with a group of retail agents beneath it, under one master code. 

Each cluster or network has a defined agreement or contract, which outlines the benefits and requirements of membership. 

No two cluster agreements are exactly the same, so be sure to read the fine print in the contract and then ask questions about the practices of the cluster that go beyond the agreement.

Common Provisions that Exist in Most Insurance Cluster or Aggregator Agreements

Most of these benefits and rules are included in an average membership agreement:

  • Access to Desirable Carriers—As a member, you will likely gain access to many desirable carriers the cluster has developed relationships with through collective bargaining. Look for a list of appointed carriers on the cluster website or ask (if it is not included in the agreement). 
  • Profit Sharing—Many agreements suggest the potential of increasing your revenue from participating carriers by 20 to 40%. Things to look for: How profit sharing is apportioned among members; if there are criteria that preclude your participation; what do the loss ratios and premium volumes look like over the last few years; and, how does the cluster protect your profit sharing against poorly performing members.
  • Account Ownership—When you join a cluster, you remain an independent agent; however, you bring your book of business into the cluster or network with you. Make sure the agreement defines what happens to your book if you decide to leave the cluster. Many agreements state that you are the sole owner of your book, but some do not—you may be required to “buy back” your book of business. Read the fine print!
  • Exit Penalties—Some organizations charge a fee to leave the cluster. This may not be highlighted in the agreement, so be sure to establish the rules around departure. Voldico, for example, does not charge an exit fee.
  • Other Fees—Some agreements have initiation fees, monthly fees, and maintenance fees. Make sure you understand the fee structure before signing any agreement.  

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