Potentially Starting My Own P&C Agency...Cluster Questions

[NewinSD]

I have been working as a Broker for an Independent Agency for the past two years. I am interested in starting my own Agency down the road, but am a little hesitant to speak about this to my boss. I assume my best bet would be to join the cluster of brokers which I am already affiliated through my current Agency. Just wondering if anyone can give me an idea about how much premium my book of business would need to be generating before a reputable cluster would be interested in having me join? Are there other requirements for membership in a good cluster, such as loss ratio? Also, do they require I higher a CSR or Office Manager right away or can I be a one man show for a while while I'm building my book? Anything else I should consider in advance of taking such a huge step? Thanks for any and all input!

[scott]

Don't just dismiss bringing your agency management into your plans. Is it a good environment? Is management open to innovation and creative ideas? Can you build a model in your current agency that allows you to build equity while the agency gains too?

There are opportunities in clusters. However, you may have gold buried right below your feet.

[AgencyEquity]

There are all kinds of agency networks across the USA and even worldwide. Many of these groups refer to themselves as “clusters,” but there are also franchises, alliances, and other type of networks. Regardless of what they call themselves, they are basically master agencies that are a group of retail agencies under one master agency code. Most carriers now recognize these organizations, further giving a sub-code to their member agencies. More often than not, the sub-code show the member agency name, not the master agency name. For the few carriers that don’t sub-code, it will show the master agency name, though this does not seem to be the norm as of late.

Most of these organizations are open to bringing on new members, though some of these groups may be closed to the existing agency members. Many welcome start-up agencies, while others have minimum requirements to join and require only established agencies with a minimum premium volume. Nearly all of these groups have an initiation fee, often several thousand or more to join. Monthly fees can vary, from a percentage of commissions, a fixed monthly fee, or a combination of these. The process is typically that a prospective member completes an application process and it is then reviewed by the decision makers of the organization. You may need a business plan or an agency profile report along with the application. You may also need to provide loss ratios as the last thing these groups want is an agency with loss ratio problems. If you have had some great loss ratios as a captive agency, I would include this information as it can only help you case and demonstrate that you are a good underwriter.

A cluster is a very good idea, if not essential for the small to mid-size agency in the current marketplace. In most cases, they will provide you will all the carriers you need, they negotiate with these carriers and you share in on profit sharing. Speaking of profit sharing, it’s very difficult for the smaller agency to meet minimum requirements to achieve any kind of profit sharing and master agencies allow this to be possible by pooling their volumes. Most of these organizations do keep a certain percentage of the profit sharing and often return a bigger percentage back to their members, based on a certain formula.

How do you choose which is the best organization for you? The first step is to visit the website of those operating in the state you are in, you can find a list of these organizations and the states they operate in at http://www.agencyequity.com/insurance-agency-clusters
This page may also be helpful for those looking to start an Independent Insurance Agency:
http://www.agencyequity.com/starting_an ... nce_agency

[aahorncole]

I hope your boss is not reading this, Just kidding. Nevertheless you need to make quite a big margin in order to depend on it. I can't give you the exact numbers since i'm not an expert on the matter.