Insurance 101: What Are Aggregators, Networks, and Clusters?

Building a successful insurance agency doesn’t happen overnight, so how can smaller or recently established insurance agencies compete for carrier appointments if they lack the resources, connections, and bargaining power that larger agencies have? One option for any agency struggling to secure carrier appointments is to join an insurance aggregator, network, or cluster. These alliance organizations are purpose-built to support insurance agencies as they work to establish greater market presence. 

While the general intent of an insurance aggregator, network, and cluster is the same—enabling insurance agencies to collaborate, share resources, and expand their carrier access—there are some key differences between the three organization types. We’ll explore the differences of each along with their benefits, but first let’s cover why an insurance agency might choose to work with an insurance aggregator, network, or cluster in the first place.

Why are carriers more inclined to work with large agencies?

Carriers are often reluctant to negotiate contracts with smaller or newer agencies, preferring instead to partner with larger, more established agencies. From a carrier’s perspective, the larger an agency’s producer force is, the faster that agency can help them gain market share and earn revenue. While this line of thinking drives carriers’ preference for working with larger agencies, there are a number of other reasons a carrier may hesitate to partner with smaller agencies. These include:

• Higher probability of M&A activity: Mergers and acquisitions affected 750 agencies in 2024. Insurance carriers may think twice about contracting with a small or newly formed agency if they feel it has a high chance of being absorbed in the year’s M&A activity. 
• Greater compliance and security risks: Both newer and smaller agencies pose greater risks for carriers. Inexperience plus lack of resources can render an agency’s processes unable to support robust compliance activity or data security standards, both of which increase a carrier’s risk.
• Smaller ROI: It takes time and money to draw up contracts, so carriers need to be selective about which agencies they spend their resources on. Signing contracts with smaller agencies could mean lower ROI, or at least a longer wait time to see any sort of meaningful return. 

For these reasons, unless an agency has somehow managed to secure a few hundred producers right out of the gate, getting a carrier appointment isn’t going to be the easiest. However, there are ways to increase your chances. One option is to join an insurance aggregator, network, or cluster. 

What is an insurance aggregator?

Much like the name suggests, insurance aggregators are organizations that band together, or aggregate, multiple insurance agencies under a single contractual framework. These businesses might also go by other names, such as a national marketing organization (NMO). By joining an insurance aggregator, independent agencies agree to pool their premiums and resources together to gain access to a wider range of products and carriers. Agencies that join an insurance aggregator also benefit from centralized technology platforms, marketing support, and management tools that allow them to spend less time on administrative tasks and more time building relationships and selling to clients. 

What is an insurance network?

Similar to aggregators, insurance networks are organizations that help connect agencies to insurance carriers that they might struggle securing appointments with on their own. Insurance networks provide similar services to aggregators, but they’re typically larger, offer a more formalized structure, and may also include unique offerings such as specialized training programs for agents and greater compliance support. Networks also tend to have captive agreements with specific carriers, while aggregators offer more flexibility for which carriers their members can partner with.  

What is an insurance cluster?

Insurance clusters offer similar benefits to agencies as aggregators and networks—think greater market access, higher commissions, and additional administrative support. However, clusters differ from aggregators and networks in that members are typically regionally or locally based rather than national. Because of this, insurance clusters are often smaller in size than aggregators and networks and typically have less rigorous membership requirements. 

How are insurance aggregators, clusters, and networks regulated?

Like other key players in insurance distribution, insurance aggregators, clusters, and networks are primarily regulated by state departments of insurance, with the National Association of Insurance Commissioners (NAIC) playing a crucial role in setting and coordinating standards. As the insurance sector continues to evolve, regulatory compliance and security remain a top priority for these alliance organizations.

From a liability perspective, any producer found to be operating out-of-compliance is a liability for everyone in the distribution pipeline. So, staying on top of producer licensing along with changing regulations regarding data protection, privacy, and ethical marketing practices is a top priority for each of these alliance organizations. 

What are the benefits of joining an insurance aggregator, cluster, or network?

Greater access to insurance carriers and products

As previously stated, one of the top benefits an agency gets out of joining an insurance aggregator, cluster, or network is an easier time securing carrier appointments. By leveraging pooled premiums, insurance aggregators can offer their agency members more favorable deals with major insurance carriers compared to what those agencies could negotiate on their own. As a result of getting more appointments, agencies and producers can offer their clients a greater variety of products, which in turn increases client satisfaction and encourages customer loyalty. 

Maximized commission rates and profits

Agencies that join insurance aggregators, networks, and clusters can leverage their organization’s combined premium volume to achieve significantly higher commission rates than they could on their own. Plus, the increased bargaining power that comes with being a member of an insurance alliance means agencies can negotiate benefits and bonuses that typically only larger agencies have access to. With the major boost this can have on an agency’s bottom line, it’s no wonder that commissions and profit share rank highest among the benefits of joining an insurance network organization. 

Shared resources, technology, and support

Building a successful insurance agency is about more than just securing carrier appointments. For long-term success, agencies rely on modern solutions like agency management systems or compliance management technology to increase their operational efficiency and offer their clients a more streamlined experience. But these solutions don’t exactly come cheap, and many smaller or newer agencies just don’t have the budget for them. Nor do they have the budget to pour into things like marketing, product training, or administrative support. The agencies in an insurance aggregator, network, or cluster benefit not only from shared premiums, but also from shared resources, technology platforms, and overall community. 

What to consider before joining an insurance aggregator, cluster, or network

While the benefits of joining an insurance aggregator, cluster, or network are plentiful, there are a few things agencies should be aware of before becoming a member. Before you sign on the dotted line, do your research surrounding:

• Membership fees: Initiation fees for these organizations can range from a few hundred dollars to a few thousand. It’s also likely that any aggregator, cluster, or network you join will charge monthly membership fees that vary from a fixed rate to a percentage of your sales to some combination of the two. 
• Penalties for leaving: Plenty of insurance aggregators, networks, and clusters charge exit fees to discourage members from leaving, so before you join, be aware of how much changing your mind later on might cost you. Beyond exit fees, understand what leaving might mean for your book of business. Do you have the option to buy back your portfolio or do you have to surrender it and lose your clients? 
• Noncompete agreements: Some insurance aggregators, networks, and clusters either don’t allow member agencies to write business with carriers outside of their platform, or require a cut of any business members write with outside carriers. 

Starting an insurance agency from scratch? Joining an insurance aggregator, network, or cluster could be in your best interest

Growing a successful insurance agency takes time. If you’re having trouble securing carrier appointments as a new or small insurance agency, joining an insurance aggregator, network, or cluster can help you get your foot in the door. These in-between business entities are just one of the complex structures that make up insurance distribution chains. And if you’re just getting started on your new agency, check out our agency startup guide to help troubleshoot some of the decisions and regulatory hurdles you’ll have to clear, aggregator or no.

If you happen to be an insurance aggregator, network, or cluster looking to streamline key distribution channel management workflows for your agency partners, AgentSync can help. See how our solutions can enable your members to scale their distribution networks (without sacrificing compliance!) with automated workflows and integrated, real-time producer data. Talk to an AgentSync expert today.