They have a lot of names within the P&C world: Agency Networks, Agency Groups, Clusters, Premium Aggregators, Agency Franchises, etc. They serve a very important role in the P&C industry, in particular. One or more of them could provide a solid base for your agency to succeed. As many thread posters have indicated in these Forums, these organizations can be a very viable way for an agency to acquire markets and services that might otherwise be difficult or not likely to obtain in this marketplace. However, when evaluating any of them, you need to ask - at a minimum - the following questions as part of your due-diligence process.
I will refer to all of these as ‘Networks’ for the purpose of this
piece.
1. Who would own the business that I produce as a member of your Network?
Obviously this question is critical but I have known agents who have joined Networks without asking for clarification about it and have paid the price, as a result.
2. What would be my commission percentage?
Determine what your commission percentages would be from day-one after joining? Also, ask if you have the ability to earn enhanced commissions in the future and under what specific circumstances. Also, find out if carrier bonuses are paid directly to your agency, for accomplishing specified production goals during the course of the year.
3. How would I access markets?
Many Networks are set up to write business from their members through a central placement facility or a third-party. Determine if it is important for you to be able to write business directly with carriers, by using their online systems and contacting their underwriters. This is not always critical to every agency, depending on each particular situation and circumstances but it is important to be clear as to how this will work for you.
4. Whose name would appear on the declaration page?
Centrally placed business usually bears the name of the Network on the policy declaration page. Under a direct access model, your agency name would appear on the declaration page. This is not a key concern to all agencies when evaluating Networks but for many it is very important.
5. Is there an initiation fee? If so how much and what other fees are involved to a member as they progress with you?
Obviously, be very clear about this, especially regarding future fees of any kind.
6. Will the Network take an equity position in my agency?
Some do so with business written through their Networks and also in business not written through their Networks. This is a critical consideration for an agency. Ask the Network Representatives for the names of some of their members in your State and Region. Call them or set up a breakfast or lunch meeting with them. The prospective Network should be happy to provide you with names, websites and phone numbers. Ask the current members how the program you are considering is working for them, especially as relates to the Network taking an equity position, if they do so.
7. Can I earn profit-sharing through the network?
Some Networks retain all profit-sharing while others share it with their agent partners. Ask for written examples of how their program addresses this feature.
8. What is the minimum production level for my agency to be eligible to participate in your profit-sharing program?
This should be provided in written form.
9. What else can the Network provide for my agency besides market access?
How about free consulting to help me maximize profits? Producer training, financing, marketing and sales support, agency perpetuation planning assistance, etc. What else and how do you deliver it? Are there additional costs?
10. What would happen if I sold my agency at some point after joining your Network?
Be clear on what would occur. This is obviously very important.
Develop a couple of scenarios that you might conceive of for the future of your Agency and get an understandable explanation of what would happen in the event of a sale under each circumstance.
**Definitely ask for a copy of the contract you would be asked to sign. Take some quiet time to read it! Make notes of your questions and ask the prospective Network representatives to address them. Then have it reviewed by an attorney with insurance contracts expertise and/or one of your State or local professional insurance organizations, like the IIA or PIA. This investment of your time and money can prove well worthwhile.
In conclusion, while this is certainly not all-encompassing in terms of the questions you should ask, it incorporates some of the key questions you need to be asking. Ask a lot of questions! Make sure you get answers that make complete sense to you. You may want to consider writing out your questions and submitting them to the prospective Network partners and ask them for written responses. Talk to other agents. Pose your questions on this Forum!
Obviously you are making a very important decision that could affect the future of your agency and for you personally, for a long time. You need to be certain that you do the most thorough job possible in your evaluation process. Take your time. You need to ‘think it through’ and it needs to make sense for you and your agency situation.
Hopefully, I have given you some useful thoughts here.
Phil Tuccy
http://www.insurancegroupconsulting.com/
Free consultation for Agents considering Insurance Networks & Alliances Relationships