Page 119 - The UnCaptive Agent

92 THE UNCAPTIVE AGENT

require $300,000 in earned premium a year to qualify
for profit sharing, while the standard in the industry is
$500,000. A typical small agency with four to six carriers
to feed has a difficult time producing enough business
to get profit sharing from all of them. Even when the
agency does receive profit sharing, they’re receiving it
at the low end of the table because of their low volume.
Further, their low volume makes them susceptible to
having an undesirable loss ratio due to a lack of spread
of risk. As a result, many small agencies receive little
or no profit sharing.

Alternatives to Going It Alone

However, even in a small agency, a well-managed book
of business can result in significant additional income.
This is among the reasons why it’s best in the begin-
ning years not to take on too many carrier contracts.
Because of this profit-sharing scarcity among smaller
independent agencies, we have seen the rise of what
are called Market Access Providers or Aggregators in
the industry. This phenomenon began over thirty years
ago with agents banding together to share an insurance
company contract. These so-called “clusters” arose as
a way of generating additional income for the smaller
agent. But while they can result in the agent making
more money, clusters are problematic for insurance
companies because insurance carriers don’t get more
business in exchange for the increased compensation.
Another recent alternative to going it alone that many
former exclusive agents, captives, and independent insur-
ance agency producers have benefited from are what I
refer to as “agency development organizations.” This
is what my company is—One Agents Alliance. We do
much more than merely aggregate premium to help