CLUSTERS – ARE THEY RIGHT FOR YOU?
by Val Jordan
As an independent agent, you know that it's becoming increasingly difficult to find products and services. Carriers have increased production requirements, wholesalers are starting to require volume commitments, and your clients are demanding more services than you can provide. So, how can you stay competitive and service your existing book, while increasing your customer base? Val Jordan recommends that you join a cluster.
What's a cluster? How does it work? Read on.
A cluster is a group of independent agents in a common geographic area who join forces to service a wider customer base and cross-sell by combining their individual specialties. As with a producer group, which services corporate or affluent Life insurance clients, the cluster achieves the same thing for Property/Casualty agents in a more limited area. By banding together, these agents share a common business philosophy, a compatible marketing strategy, and the ability to provide top-of-the-line product offerings that yield higher compensation.
Here's a snapshot of what a cluster might look like:
- Personal Lines agencies seeking to sell Commercial Lines
- Commercial Lines agencies wanting to offer Personal Lines and Employee Benefits
- Employee Benefits advisors seeking to market both Commercial Lines and Personal Lines to Main Street businesses and their employees
Their alliance gives these agents the ability to cross-sell existing clients, while providing a full complement of products that will generate significantly higher compensation for the entire group.
How do you get started?
- Determine your geographic footprint. Decide how large an area you can service effectively.
- Evaluate and select your strategic partners. Determine who within your geographic area offers the potential for alliance and evaluate their book of clients to avoid duplication and mine new opportunities.
- Execute a marketing agreement. As with a third-party marketing firm, determine the roles and responsibilities of each strategic partner and the compensation arrangements involved.
- Create a new agency entity. To maintain your independence while boosting your production, consider creating a new agency entity. You can either place new business from the strategic alliance here or you can appoint each independent agent as a sub-producer of the agency, thus consolidating accounting while tracking individual production.
- Design a business plan. Creating a business plan will focus all parties on the new business opportunity. This plan will determine the amount of capital required to expand current technology, hire additional support personnel, or fund a new hub location. To assist you in providing this capital, consider working with InsurBanc, which specializes in financing independent agents for the purposes of expansion, acquisition, and producer development.
- Determine a cross-selling marketing strategy. Now that you have a potential book many times the size of your existing one, a systematic contact strategy must be crafted.
Clusters won't be for everyone. However, for agents who are looking for ways to increase their base while providing their expertise to a wider universe of prospects, clusters provide a new and exciting business opportunity.
Valerie Jordan is president of Jordan & Jordan Associates, a consulting services company in Belchertown, MA. You can reach her at (803) 932-9540, fax (803) 945-2233, e-mail [email protected] , or visit www.Jordanandjordan.com.