Pre-Checklist For Joining Insurance Cluster

Before Joining An Insurance Cluster, Do Your Homework

Joining an Insurance Cluster may seem overwhelming, and if you haven’t done your research, you may be looking at some bumps in the road or realize you’ve joined the wrong cluster. We’ve put together these helpful hints in a checklist to help our potential agents on the ins and outs of joining an insurance cluster:

How much will this cost?

It’s important to get a summary of fees that it costs to join, including set up fees, monthly membership fees, fees for management system & rater, licensing fees (for you and your licensed producers), E&O costs, training costs, and any other possible fees. Find out if the insurance cluster offers a group E&O at a discounted rate to help cut costs and provide better coverage. Find out what other group discounts can the cluster provide, such as discounts on the rating/management system. Also office requirements can also add into expenses with rent, utilities, office supplies, etc. Also, check to see what the fees are to upgrade or downgrade your contract, if the insurance cluster has different level contracts.

What’s involved to end my contract?

One of the biggest things agents do not consider when joining an insurance cluster is the exit fees if you decide to leave the insurance cluster. There may be fees to break contract or have your policies released. For example, if you have a $2 million dollar book, it could cost up to $100,000 just to have your policies released. Consider the time it will take to process the exit fees and release your policies to you. It takes time to contact each carrier to have your policies moved out from one insurance cluster to another. And keep in mind that each carrier may have different requirements for having your book moved, which could take up more of your time and effort. Overall, the time it can take to process your book out of one cluster to another could take anywhere from 2-6 weeks. If you have a $500k+ book, there’s no way you’d want to have to BOR each policy one by one. So consider your options with the cluster that you join to know exactly what you’re getting into.

You should also check if there is a non-compete clause in the contract; in which case, if you leave the insurance cluster, you would not be able to sign with another cluster or write with the same carriers for a number of years.

Who owns my book?

Find out if you own 100% of your book when you join an insurance cluster, or if you’re actually signing over 10-50% to this new cluster.

What is the commission structure?

Find out what commission split you’re getting both new business and renewals. What is the bonus split? Find out if you would receive profit sharing and if so, find out how much you’ll get and what the qualifications are. For example, do you have to be profitable or have a certain premium or need to be growing? These are the questions you need to ask the insurance cluster.

Also, how transparent is the insurance cluster with their commissions – will they give you a copy of commission statement to show how much they are getting versus what you are getting with the carriers?

Customer Service Support

If an insurance cluster only has 10 staff and are servicing 100 agencies, you can probably estimate that the customer service support is going to be pretty poor. The staff to agency ratio has to be more even to be able to provide quality customer service support to the agents. Find out how many support staff the insurance cluster has, and how much of those staff will be supporting you.

Of the staff that is supporting your agency, what kind of compliance support will you get? Find out if the insurance cluster will help you audit policies or if you would be expected to handle your own compliance work. This is going to make a huge difference in terms of your relationship and status with the carriers, as well as your overall profitability.

In addition, does the insurance cluster provide outsourcing to agents and offer trained staff to hire to help you with things like data entry, customer service, and telemarketing? This can be a great benefit when considering an insurance cluster to join, especially considering the costs to outsource may be a lot less than hiring your own staff locally.

Lastly, does the insurance cluster have staff and a physical office in your state? If that’s important to you, you definitely want to ask that question when shopping around for the right cluster to join.

Carrier Access

Finding out which carriers the insurance cluster can provide access to should be a huge thing to research. Make sure it’s carriers that are available in the state you write business in, and also carriers that write the lines of business you’re clients need. If you join a cluster that only offers preferred carriers, and you write 100% nonstandard business, you’re going to be joining the wrong insurance cluster. Another factor to consider is if the carriers offered are going to be competitive for your area. It’s important for an agent to do their research and find out which carriers are competitive for them. A good detector of a cluster with good support and carrier access is looking at how much time it takes the agent to write their first policy from the day that they join. If you’re not able to write any business for months down the road, then you probably didn’t join the right insurance cluster.

What about commercial carriers? Some clusters will not provide commercial carriers. Check to see if you’ll have to manually submit quotes and get a lower commission for commercial business or if you’ll be get direct access with the commercial carriers.

Also, it’s important to find out if you can get direct appointments with any of the carriers through the insurance cluster. A lot of agents prefer to have their agency name on the dec page; but some clusters will work with the carrier to only brand the cluster name on the paperwork. If the cluster is really trying to help you grow your independent agency, this might be an important factor for you to look at.

What do other members think?

Consider if the insurance cluster is willing to share testimonies of other agents within the cluster. If they’re open to providing references and having you speak to other agents that have been members with them, that’s a good sign that you’ve joined a good insurance cluster.

Has my attorney reviewed the contract?

You should always make sure you hire an attorney to review any type of legal paperwork before you sign on the dotted line. Let’s face it, legal jargon can be easily misinterpreted. You want to fully understand what you’re agreeing to before you join any insurance cluster. You may not want to spend the money, but it can actually save you money, stress, and potential legal issues; so it’s best to have the professionals review. Provide the attorney with a copy of this guide as well so they can compare the contract to see if the cluster addresses all of these items.

Shop Around

Last but not least, are you shopping around and getting information from several different clusters or just joining the first one you find? The only way to find the best insurance cluster for you is to make sure you compare your options. Compare each cluster using this checklist and choose the one that lines up the most with your needs.

Top 15 Questions To Ask Insurance Cluster

  1. What are the fees involved in joining and maintaining membership?
  2. What are the fees to end my contract?
  3. Is there a non-compete clause in the contract?
  4. Who owns my book once I join?
  5. What is the commission structure?
  6. How do I qualify for profit sharing?
  7. What kind of carrier access will I get?
  8. Are the carriers offered available in my state?
  9. Will I be able to get direct appointments with any of the carriers?
  10. What kind of customer service support can your cluster offer?
  11. What are the opinions of other members that have joined the cluster?
  12. How long after I join will I be able to write my first policy?
  13. Are there any discounts offered by joining the cluster?
  14. Does the insurance cluster help with compliance work?
  15. Does the insurance cluster provide trained staff to hire for data entry, customer service, and telemarketing?