Cluster F_________ed

Aug 2, 2016

  1. Bell Curve
    Offline

    Bell Curve New Member

    Posts:
    10
    Likes Received:
    0
    Ok this is driving me nuts:goofy:

    I have my P&C license in California I have no experience and no book. I researched a couple of clusters and they all seem to be a good deal if you are the cluster.
    Would like to start selling HO insurance.

    Wish list:
    Binding authority
    I get to keep my book
    low startup fee
    "easy" divorce clause.

    Can anyone recommend a semi decent cluster in California for a newbie like me?
     
  2. InsDoc
    Offline

    InsDoc Expert

    Posts:
    20
    Likes Received:
    1
    State:
    Arkansas
    The only advice I can give you is to read the fine print. This is obvious advice, I know, but it can not be said enough. I can't elaborate on the details too much but I know an agency that really got screwed on a deal and we almost did with our agency. KNOW what you are getting into.

    GOOD LUCK!
     
    InsDoc, Aug 3, 2016
    #2
  3. djs
    Offline

    djs Super Moderator Moderator

    Posts:
    6,679
    Likes Received:
    74
    State:
    California
    You need to add a selection of carriers to your wishlist.

    You also need to realize you won't get everything on your wishlist. The only way to do that is to get direct appointments, which can be very difficult with some carriers, especially just starting out.

    You need to realize that a cluster is putting themselves on the line for you. It really is a 2 way street, they don't want to put the time and energy into it if you want to leave 6 months later. What they are really providing you is access to carriers that you won't get on your own, but they do charge for that privilege.

    You are doing the right thing by asking what it takes to get out if you want. This is always a messy process, for you, for the cluster and for the clients. The trick is to make sure the process is manageable.

    Here is the challenge you will have. In most clusters, the broker of record (BOR) is the cluster, not you. This means they get paid the residuals and then forward them to you. If you can find one that makes you the BOR, then live is much better, but only a few do.

    Seasoned agents can get confused in how the 'divorce' process will work. Ask a lot of questions, not just about you and your business, but also how it will impact the clients.

    I believe most clusters will allow you to keep your book, but, there is a charge to do it. Its not the easiest thing in the world.

    Dan
     
    djs, Aug 3, 2016
    #3
  4. shawnmwalker
    Offline

    shawnmwalker Guru

    Posts:
    914
    Likes Received:
    50
    Dan Makes some great points.

    a few more to consider:

    How do you get the access you want? Direct codes or under a house code?
    How many different ways can you imagine the separation going down? Does the contract speak to all those scenarios?

    What matters most to you? Like Dan said there will be some trade offs. Some do allow commission to come to you. But some of those want 10% of your ENTIRE PIE. Not just your P&C pie. They might want a tax statement to prove they got their 10%. These groups often have an equity interest piece as well in your book.

    Again, no right or wrongs here but one really needs to know what they want prior to going down one road too fast.

    Give me a call or pm me if you have questions. I can point you a few directions.

    Your limited experience too, might limit where you can go. So that too is something to consider. You may want the best Darn contract in the world from a cluster or group, but to Dans point, groups have to first and foremost protect the members of the existing group
     
  5. PhilL
    Offline

    PhilL Guru

    Posts:
    321
    Likes Received:
    17
    State:
    Florida
    Really excellent advice here from DJS. To possibly give agents some additional arrows in the quivers, I have published this before but here it is again, for those agents who might be trying to work their way through the decision making maze:

    Some Key Questions to Ask When Talking to Agency Networks Representatives

    While certainly not all-encompassing, the following are some key questions that must be asked of any agency network group or franchise that an agent or agency might be considering and evaluating.

    1. Who owns the business that is produced through your program?
    Your agency partner/member or your Group? Is there a ‘buy-out’ clause? If so, what are the specifics?

    2. Who is the Agency of Record on the policies? How is it stated on the policy, for example is the policy issued by the carrier in the name of your agency partner only, in the name of your Group (or a related entity) or are both named as Agency of Record?

    3. Equity Position - Does your Group take an equity position in partners’/members’ agencies?

    4. Agency Sale - What is the scenario when an agency partner decides to sell to another current member agency? How about when the agency sale is to non-member agency?

    5. Fees – What are the costs, both initiation (if any) and on-going? Also, if I were to exit the relationship - for whatever reason - will I incur additional fees or charges? What if you terminate the relationship?

    6. Access – Can the partner/member communicate and submit directly with the carriers or does all contact go through your Group or one of your affiliated services? Will I have real-time quoting ability? Binding authority? If not, what is the turnaround time on quotes? (The answer will probably be: “It depends on the carrier.” If so, then ask for current average times with regard to two or three of their different carrier partners.)

    7. Profit-Sharing / Contingency Arrangements – Is it included in your programs? If so, what are the minimum premium production requirements under your program? Also, which are the carriers from which they regularly receive profit-sharing

    8. Direct Contracts – Can your agency partners take-on other carriers after joining your program? If they have direct contracts when they join you, can they keep them?

    9. Guaranteed Carriers - Before an agency joins your Group, can you guarantee that they will be able to write business through specific carriers? If so, which ones?

    10. Physical Location of Agency – Is this a requirement or do you allow me options in your program? For example, no office or an office in a personal residence, if State regulations allow?

    11. Time to Start Producing – Once an agency is approved for your program membership, how long does it typically take for them to start writing business?

    12. Training – How is it conducted, both in relation to your systems and those of your carrier partners?

    13. Program Features – What items are included in your program for a new member?
    Some examples: E&O? Comparative Rater? Agency Management System?

    I also recommend that you ask for the contact info of at least two current members in your State of each agency network group you think you want to consider. Take the time to call them to explore their experiences.

    Hope this helps those agents who are evaluating agency networks. Let me know if you would like to discuss any of these items in more depth. Phil
     
    PhilL, Aug 3, 2016
    #5
  6. Bell Curve
    Offline

    Bell Curve New Member

    Posts:
    10
    Likes Received:
    0
    InsDoc
    I know what you mean.
    I am not against sharing my commission but some of this clusters are really shady and cant give me clear answers.

    ----------

    Dan,

    Thanks for that, very useful info. I'll definitely ask about BOR although I am pretty sure who is always going to be the BOR :(
     
  7. RicFlairII
    Offline

    RicFlairII Expert

    Posts:
    92
    Likes Received:
    1
    The key thing with a cluster is contract, contract, contract.

    Read the contract carefully, and make sure you are not giving up too much.

    Also (and I have said this before), make sure the cluster cannot terminate
    the agreement at will on their end. You could get sick for months and they
    could terminate and you would lose everything.
     
  8. GXR2
    Offline

    GXR2 Super Genius

    Posts:
    153
    Likes Received:
    0
    Do you know what a "Mark" or "Pigeon" is? Well ... That's what they call in criminal science a yuck who gets suckered into a con and looses everything.

    There are genuine good deals, and con games disguised as good deals. Read all fine print. Protect yourself.

    The previous posters offered up great suggestions. I'll add one more:

    Ask how future commission structure is handled if they decide to change it well into your relationship.
     
    GXR2, Aug 10, 2016
    #8
  9. FL P&C Broker
    Offline

    FL P&C Broker Guru

    Posts:
    994
    Likes Received:
    1
    State:
    Florida
    Seems like all the clusters have some sort of clause that allow them to do terminate the agreement at will.
     
  10. RicFlairII
    Offline

    RicFlairII Expert

    Posts:
    92
    Likes Received:
    1

    Then proceed with caution.

    This also applies to captive carriers such as Allstate.

    When I was with Allstate, a guy down the street had a massive stroke.

    He pretty much lost his book of business, as he was unable to work, and
    the contract said they could terminate him if certain production requirements
    were not made.

    I had a couple of cluster contracts looked at by my attorney- his response was
    not only NO but HEL* NO.
     
Loading...