Going independent, cluster or direct contracts? Background/ Questions

[Agent 0]

Background:

My father has a P&C book of business and is currently a captive agent with Farmers. I have a health book of business that I've been growing on my own for the last two years and I would've likely done things a little differently with my contracts if I had known what I know now so I want us to do our due diligence before making a decision. We are going independent on the P&C side shortly and are trying to decide between going with a cluster or trying to get direct appointments with carriers.

Some questions:

1. Most clusters collect a percent of commissions and bonuses, do they also get overrides?

2. How hard is it to get/ maintain contracts when you go through a cluster vs. not going through a cluster? Clearly joining a cluster will help you get contracts but my dad also thinks that going through a cluster is safer in terms of keeping contracts and not getting terminated.

3. Is it harder to maintain/ grow a commercial/ P&C book of business if you get direct appointments as opposed to going with a cluster?

4. We have talked with an independent agent who went the direct contract route and he only has 4 or 5 contracts. Is this a typical number of contracts? More is usually better but would we be losing a lot of business by not going with a cluster?

Thank you:

This is a tough decision and I appreciate any advise anyone is willing to give.

If there are any question you may have for me or any questions we should be asking that we're not please let me know.

 

[marindependent]

1. Most clusters collect a percent of commissions and bonuses, do they also get overrides?

Do they get overrides? Or do You get overrides? You have to ask the cluster this question and its a good one.

2. How hard is it to get/ maintain contracts when you go through a cluster vs. not going through a cluster? Clearly joining a cluster will help you get contracts but my dad also thinks that going through a cluster is safer in terms of keeping contracts and not getting terminated.

It is typically easier through the Cluster, but not always.

3. Is it harder to maintain/ grow a commercial/ P&C book of business if you get direct appointments as opposed to going with a cluster?

It is often easier to get the commercial appointment than it is with the personal lines appointment. But not always.

4. We have talked with an independent agent who went the direct contract route and he only has 4 or 5 contracts. Is this a typical number of contracts?

Totally depends on the sistuation. Size of Book, type of Book, etc.

Look - this is not a Either Or Scenario. You are going to have both Cluster Appointments and Direct Appointments.

What state are you in? [Are insures appointing actively in your state right now?] Are you going to be more Commercial or more Personal Lines? What is your focus?

Don't do a contract where the cluster requires all business through them.

 

[newbie2001]

Recommendations on a cluster? I'm evaluating a few. SIAA required 3yrs experience. Smart choice doesn't but I guess they pay lower comp and have a non compete. Give you access to less carriers.

Any other good clusters out there?

Do they get overrides? Or do You get overrides? You have to ask the cluster this question and it's a good one.

It is typically easier through the Cluster, but not always.

It is often easier to get the commercial appointment than it is with the personal lines appointment. But not always.

Totally depends on the sistuation. Size of Book, type of Book, etc.

Look - this is not a Either Or Scenario. You are going to have both Cluster Appointments and Direct Appointments.

What state are you in? [Are insures appointing actively in your state right now?] Are you going to be more Commercial or more Personal Lines? What is your focus?

Don't do a contract where the cluster requires all business through them.

 

[InsuranceThatFits]

Background:

My father has a P&C book of business and is currently a captive agent with Farmers. I have a health book of business that I've been growing on my own for the last two years and I would've likely done things a little differently with my contracts if I had known what I know now so I want us to do our due diligence before making a decision. We are going independent on the P&C side shortly and are trying to decide between going with a cluster or trying to get direct appointments with carriers.

Some questions:

1. Most clusters collect a percent of commissions and bonuses, do they also get overrides?

2. How hard is it to get/ maintain contracts when you go through a cluster vs. not going through a cluster? Clearly joining a cluster will help you get contracts but my dad also thinks that going through a cluster is safer in terms of keeping contracts and not getting terminated.

3. Is it harder to maintain/ grow a commercial/ P&C book of business if you get direct appointments as opposed to going with a cluster?

4. We have talked with an independent agent who went the direct contract route and he only has 4 or 5 contracts. Is this a typical number of contracts? More is usually better but would we be losing a lot of business by not going with a cluster?

Thank you:

This is a tough decision and I appreciate any advise anyone is willing to give.

If there are any question you may have for me or any questions we should be asking that we're not please let me know.

I'm working through this myself and so far I think the answer is both. Part of the question is not just direct vs cluster, but also what levels of production are required? Is there profit sharing? At what level does profit sharing kick in? Are there production bonuses apart from profit sharing? How often are each paid out? At what point do you qualify for profit sharing? What monthly fees would there be? Can you sell your book or does the carrier or aggregator have right of first refusal? Does the carrier have training available for new agents or do you have to do all that yourself (this will likely be a blended effort between your agency, the carrier, and/or the aggregator). What percentage are the commissions and what are the splits between aggregator and the agency? I think if starting from scratch having an aggregator would help, but ya'll aren't starting from scratch ya'll have a lot of experience already, just not as an independent...so you are what I call, "semi-scratch".

 

[maxherr]

It's virtually impossible to go independent in P&C without an existing book of business. Farmers, State Farm, Allstate agents generally don't own their book and cannot take it with them. About 15 years ago, I transitioned to being an independent agent from being a captive, and wanted to expand into P&C, so I went to work in a local agency . . . until the owner stiffed me on the commissions I had earned, including those for writing my own homeowners and auto. Enough said. Today, I only write apps for CA Assigned Risk/Low-Cost Auto and FAIR Plan . . . and I try to encourage the applicants to look for real coverage in the standard market, but they don't want to pay the freight. So the rest of us end up paying higher premiums for our personal lines coverages as a result.

I want my insurance companies to be profitable so they have the money to pay my claims, if and when necessary. Life is better when lived claim-free. And the insurance companies need to learn how to reduce their overhead before reducing commissions to the agents who bring them the business in the first place.

 

[shawnmwalker]

WE SHOULD TALK.

 

[shawnmwalker]

Lets see if I can quick hit these questions.

1) If they are reputable, they will Split commissions, Overrides, and Profit share. As well as all other forms of comp. There are many who will not share all those forms of comp.

2) Clusters/ Aggregators/ Groups make getting/ keeping access MUCH easier. but you do have to do a little leg work, A carrier does not leave a contract in place after five years and there is no business or quote flow. I like to give agents a heads up. "The carrier has you on a short list. Its up to you if you want to keep it, you got 1 year extension. After that..."

3) No harder or easier. Direct will get you fewer contracts and therefore impact your conversion ratio immensely.

4) He got 4 or 5 contracts but are they the right ones? (I assume they are not because not one with significant market share was appointing) Do they help him accomplish his business objectives and CLOSE business? Getting Direct contracts is rough these days. We are just now coming out of "the hardest market in a generation, If not ever" (Leader at Liberty Mutual). The industry was culled first time in many decades! As such carriers are not dying to appoint.

My thoughts, Go with a group or a cluster. Get 30 carriers, quote, bind, grow and never look back! But, I am biased of course.