Page 187 - The UnCaptive Agent

160 THE UNCAPTIVE AGENT

and attention when other new competitors may have
found a better approach.

Clusters

Lack of access to profit sharing and bonus income
led a generation ago to the formation of something
that we commonly refer to as “clusters.” A cluster is a
group of independent agencies who share an insurance
company contract. By sharing the contract, they’re able
to meet the minimum production requirements of the
carrier more easily. Because profit sharing is paid on a
grid system where the level of the bonus increases as
the volume increases, they are able to gain more profit
sharing than is otherwise possible. The disadvantage
to joining a cluster was that the agents had to give up
some of their independence because they were sharing a
contract. They had to be a little more careful about the
business they wrote. They had to agree with each other
about how they were going to conduct their individual
businesses. These disagreements have led, traditionally,
to a degree of volatility among clusters. Clusters tend
to dissolve because of these disagreements.
Another significant disadvantage of clusters is that
insurance companies don’t like them. From the insurance
company’s point of view, all the cluster arrangement
does is require the carrier to pay the agents more money
than they would otherwise have to pay them. From the
company’s point of view, the cluster doesn’t deliver any
growth or increase in volume. Clusters don’t really pro-
vide any benefits to the carrier, only negatives. Carriers
tend to discourage the formation of clusters, and they
tolerate them rather than encourage them. One thing
that is common about clusters is they tend to be based
on new or existing relationships inside the independent