Insurance Aggregators, Clusters, and Franchises - Making the Hair on Your Neck Stand Up

With a decade of dedicated research into the agreements of over 50 aggregators, clusters, or franchises in the insurance space, including the leading National Agency Alliance - SIAA, I've gained a deep understanding of their differences. This expertise allows me to guide you through the complexities of these models and why the Insurance Journal consistently ranks SIAA ? The Agent Alliance at the top. A majority of Aggregators, Clusters, and Franchises operate like these:

1) Market access is built upon a "shared code," meaning the agency is operating within a master code, which creates several issues: 1) The network model is getting paid by the carrier, and your compensation is delayed 30-90 days while the accounting is figured out. 2) Their agency name is on the declaration page. 3) Your clients are part of an enormous database that all agents can see. On the contrary, SIAA works to secure direct appointments for agencies that can demonstrate consistent new business, which is at the heart of every carrier.

2) If you are looking for help from these smaller network models, try dialing two or more time zones away, or worse yet, try calling the one person the network model has in your state for help; who was the recruiter who signed you up (you know what I am talking about). You'll find that SIAA has "master agencies" located in almost every state in the country, whose responsibility it is to manage the model in that local arena, and all the help you need is right in your local area with a fully dedicated staff.

3) Part of the allure of these aggregators, clusters, and franchises is the "extra money" they can negotiate with carriers on your behalf. Most are limited to Year-end Profit-Sharing Bonuses. The typical member of one of these groups does not understand when they join that there are multiple criteria to qualify for the bonuses. So, while they are throwing around how much money you will make on these bonuses, the best question you can ask is, "How do I get one - specifically." You will almost always have a growth requirement, a loss ratio requirement, and a minimum premium expectation. Most models I have studied make these incredibly in their favor. SIAA has been able to eliminate the minimum premium and growth requirements. Each agency has a very liberal loss ratio, which is still unmatched in the industry. Additionally, SIAA is the only model in the country to receive carrier-paid Guaranteed Quarterly Carrier Bonuses, paid on all new and renewal premiums.

4) Separating from aggregators, clusters, or franchises often creates a burden that would cause most agencies to go out of business. It is common for these network models to cancel the appointments (especially if they were a shared code). While you still own your clients, you are left rewriting your entire book in those markets where a carrier can non-renew. Worse yet, many contracts include language requiring you not to seek a carrier appointment (either individually or through another network model) for 24 months with any carrier you were associated with during your tenure. At SIAA, we are sometimes criticized for having a separation fee. However, we agree that the termination of the agreement will not interfere with your appointments and that you can continue to operate your agency uninterrupted. So, there is no need to rewrite an entire book of business or worry that you could be forced out of business because you can't access the carriers you have done business with for years.

5) Aggregators, clusters, and franchises are in the business to aggregate premiums. This is how they make money. Few have in-depth training to help staff and producers improve their skills. Broadly, SIAA is known for its training and resources to help grow, retain, and evolve in every market situation, and bar none, I have seen the benefits of SIAA programs for every sized agency.

What's my point?

Time and time again, I find that agents do not read the agreements they sign. Often, they are surprised by the differences between what their recruiter told them and the reality of the agreement. Sometimes, the restrictive language is so cleverly written that the agent does not pick up on the subtle differences. Seek legal review before you sign an agreement. I think your money is better spent upfront so you understand what you are signing than to enter into a dispute later. Most agencies cannot afford to defend a claim, and the results of any legal battle are never what you think the outcome should be.

Are you considering one of these aggregators, clusters, or franchises? Contact me, and we can discuss the pitfalls. If I can't help you, I will connect you with local folks who can provide more guidance.

Bill Gordon is Vice President of Sales for Southwest Insurance Agents Alliance (a member of SIAA). With more than 35 years in the local insurance industry, Bill uses his expertise as a former captive agent and former owner of an independent insurance agency to assist others in the industry looking to build or expand their agency. Working with SIAA, he can provide comprehensive tools, access to carriers and markets, and coaching to help owners navigate the different stages of growth and emotions that can often supersede the changes that will fuel real actionable revenue growth you can take to the bank.