Robert Wells, Tennessee Territory Manager
In my last article, “Do you own your agency?” I discussed the vast differences in agency and aggregator or cluster relationships. Here we will do a little deeper dive into some of the most crucial details to evaluate before making a decision that can dramatically affect your financial situation.
Not all “Agency Partnership Groups” are created equal. SIAA has been and remains the largest Agency Group in the USA, with almost $12 Billion in written premiums. A question I seem to get regularly is, “How is SIAA so much bigger than all the others”? The simple answer is that people are drawn to quality and transparency. They don’t like hidden agendas, misleading or ambiguous contract languages, and fine print.
When considering joining an agency partnership group, the contract is vitally important as it lays out exactly what is expected of YOU and what you can expect from THEM. Understanding those provisions is YOUR job, and unfortunately, I discover many people have yet to read/understand it entirely until it is too late.
When comparing different Agency Partnership Groups, there are a few items that must be understood and items that will dramatically differentiate one group from another. Some helpful questions to ask include:
Major Contract Provision
What is the length of the term? Is that subject to change? Under what circumstances?
What is the effect on your existing carriers? What new carriers do the aggregator or cluster bring? Will you get direct appointments or “access” to carriers?
Compensation
What about ROI (Return on Investment)? How are commissions paid? Direct from the carrier or through an aggregator or cluster?
Do commission rates vary based on the level of carrier access?
Are commission rates variable? What are the variables?
Are there minimum premium commitments to maintain commission levels? What are they?
Does the aggregator or cluster pay: Overrides? Bonuses? Growth bonuses? Profit sharing? How much, when, and what qualifications must be met (i.e., growth, profitability, minimum production requirements)?
Fees & Expenses
How are fees paid? Is there an upfront fee to join? Is there an exit fee? Are the fees fixed or variable? Is the fee structure consistent among all members?
Are there any discounts available due to membership to help reduce expenses (i.e., E&O, Cyber, software, hardware, training courses, CE, etc.)?
Authority/Binding
What is the aggregator or cluster’s binding process? Do you have direct access to carriers? If so, what are the limitations?
Do you have the authority to issue certificates and policy changes? Are there any limitations?
Ownership of expirations
Does the contract clearly state that you retain ownership of insureds written through aggregator or cluster?
For example, do you have the ability to sell part or your entire book of business? If not, what happens to it?
Termination (Exit strategy)
What are the reasons you can be terminated? What length of notice is required?
How will the business be migrated upon termination?
Are you allowed to contract with carriers provided by the aggregator or cluster after termination?
Is there a non-compete provision? What are the terms?
If there is a non-compete, is there a buyout provision of the non-compete?
How is the commission paid during the transition? How long are they paid after termination?
Does the aggregator or cluster offer assistance with the separation of business?
Does the aggregator or cluster offer assistance with agency perpetuation?
These are just some of the detailed items we cover when working with every client. Sadly, far too many agents get caught up in the “how much does it cost” question when that is the least of their concerns in the long term. As with everything in life and business, that old rule remains true… You get what you pay for.
So, crunch the numbers, look at the ROI, study the contract provisions, compare the carriers, add up the extra income, and study the terms. Most importantly, compare the various Agency Partnership Groups based on these criteria.
Then, you will understand why SIAA is “So much bigger than all the others.”