Insurance Agency Clusters – The Best Way Forward for Insurance Agents

The insurance industry landscape has changed. Hence, the insurance agents working within it must change too. The traditional insurance model is no longer as strong as it used to be. New models of selling insurance are coming to the fore – insurance agency clusters, for instance. As an insurance agent, how can you benefit? Read on to find out.  

How are Insurance Carriers shaping the Market? 

Advances in technology have changed how insurance is sold. Insurance carriers have used this to their advantage. A visible example of this is the online insurance platforms. Through online websites, insurance carriers can directly sell to the customers – cutting insurance agents out of the equation. 

Why is direct to consumer (DTC) insurance gaining popularity? 

There are two main reasons for the rise in DTC insurance: 

  • It cuts costs for the insurance carriers. The customer fills out the form. As a result, the carriers save on the commission paid to keep insurance agents.  
  • The customers can buy the insurance themselves. Cutting out the “middle-man” speeds up the process. 

A popular insurance carrier following the DTC model is GEICO. 

Will DTCs put insurance agents out of their jobs?  

To match step with the direct to consumer (DTC) popularity, agents need to take a new approach to how they sell insurance. The DTC model, however, is not going to replace them. After all, it can only quote for more straightforward insurance quotes such as auto.   

For more complex insurance such as liability, both customers and insurance carriers still need insurance agents. But agents can no longer rely on old models of selling to stay relevant. They will have to adopt changes.  

How should they go about doing this?  

The first step to doing this is usually becoming an independent insurance agent. Independent agents are not reliant on only one insurance carrier. Thus, they can be flexible with how they sell insurance. However, going independent can be difficult. Agents often find themselves pulled in many directions. 

What can they do to make it easier for themselves? 

Join an insurance agency cluster or insurance aggregator. 

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What is an Insurance Agency Cluster? 

Agency clusters are formal associations of insurance agencies formed to provide mutual support. You will also see them called insurance aggregators, insurance alliances, or insurance networks.  

An agency cluster is a good fit for the small to mid-size agency. The member agencies in an insurance aggregator usually pay a fee to join it. After that, they can enjoy the benefits of a group of agencies in the same industry. The shared pool of experience and resources is valuable. After all, there is safety in numbers. 

Benefits of an Insurance Aggregator 

What exactly do insurance agency aggregators offer that makes them attractive? 

 Listed below are some of the benefits of joining an insurance aggregator: 

Independence 

An agency cluster comprises several agencies working together to give each other support. But each agency keeps its autonomy. These clusters give agents the freedom to follow individual goals but also enjoy the power of numbers. 

Networking 

Every agent benefits from a network to support them. It is why so many choose to become a captive agent – the security of belonging to a known insurance carrier. However, the cons of going captive significantly offset the gains.  

That is not the case with insurance agency clusters. An insurance agency aggregator props up independent agencies with its co-operative approach. Networking opportunities with others in the industry lets you put your best foot forward. 

Marketing and Sales Support 

An insurance aggregator gives you marketing and sales support. These can range from advertising help to lead generation opportunities. Not just that, you benefit from the positive reputations of other members in the cluster. An aggregator may even hire marketing specialists to improve the public reach of their agencies. 

Market access 

Pre-existing relationships of the members in your cluster give you clout with insurance carriers. Thus, getting new appointments is easier. In this age of choice, a greater variety and selection of policies equals better customer retention. Even large organizations recognize the power of insurance clusters and their future in the industry.  

A case in point is the Insurance Network Alliance (INA), spearheaded by Live Oak Bank in 2018. Live Oak Bank is a specialty bank that lends to insurance agencies across the US. 

Some industry members even state that more than 80% of independent agencies in the US will be part of an aggregator group within the next five years. 

Larger commission splits 

The exact commission split of an agency depends on their agreement with their cluster. Regardless, the commission split is better than any that a carrier offers to its captive agents. Agencies get a say in the matter. This is not possible with insurance carriers who enforce rigid rates. 

Better Technology 

Insurance software and technology does not come cheap. However, it is crucial for success in the current age. Agency clusters reduce this financial burden on their members. They provide members with up-to-date insurance customer management systems.   

Always read the fine print!

The benefits listed above are valid for almost all agency clusters. However, they will differ in other finer details. We advise that you shop around for the aggregator that is the best fit for you. 

Not just that, agency clusters have looser commitment policies than insurance carriers. If a member leaves the aggregator, they leave a space. In an alliance such as these, any exits can lead to increased overhead costs for remaining members. Once again, it is in your best interest to compare agency clusters and their members. Never jump in without reading the fine print! 

Are Insurance Agency Clusters the only way forward?

They are not the only way forward, but they are most definitely the best way forward. A lone agency will not fare well against the pressures of an ever-changing insurance industry. However, an agency aggregator will. These pressures range from the rapid rise of technology to government policies. Agency clusters give you the best odds for success. 

Do you agree with us? Let us know in the comments below.

Learn how you can flourish as an agent after one call!

Schedule a call right now and learn how you can ease your work, sell more, and increase your profits!