We’ve said before, and we’ll say it again: there are many benefits when joining an aggregator, insurance cluster, or insurance group but not all are created equal. Before choosing on who to partner with, you must consider the associated fees that come along with the contract. Some are upfront and some can be overlooked.
1. Initiation fee: Some insurance aggregators, or clusters require a start-up fee to join. This can sometimes be upwards to a few thousand before gaining access to all the benefits. Of course these can vary greatly from group to group, so be sure to read the fine print and find out what it’s going towards.
2. Exit fee: What happens if you want to leave the aggregator or cluster? This isn’t something everyone considers when they’re starting out, but it can cost you! Some charge a rather hefty fee to leave, based on an overall average of your book. Be sure to understand that if you decide to leave, you can afford to do so.
3. Monthly or annual fee: An expected fee when joining. but be sure to understand how yours is calculated. Is it a fixed rate, or a percentage of your commission? Do the math based on your premium volume and desired take home after fees have been applied.
4. Commission fee: Unlike monthly or annual fees, some aggregators or clusters will hold onto a percentage of your commission instead. Others may charge a monthly fee and require smaller commission percentages. Some contracts may have varying percentages, depending on the length of membership and type of policy. Whichever the setup, calculate how this will affect your take home.
5. Equity interest fee: An example of this scenario would be: when the affiliated agency holds the minority share of ownership (often around 40%) and the aggregator or cluster owns the rest. Although not common, it is possible to find groups that allow members to maintain 100% agency independence and continue to own their book of business for life.
6. Maintenance fees: In order to access the ongoing benefits the aggregator offers its members, such as agency management software and any accounting- there may be a general maintenance fee. If you see a maintenance fee mentioned in the contract, determine exactly yours is covering & if it’s fixed or can fluctuate -if not clearly defined.