Insurance agency networks, also known as “aggregators” or “clusters” have been part of the distribution landscape for decades. They give agencies, particularly small or startup firms, access to carriers who might not ordinarily appoint them because of their small size and limited reach.
With the rise of the insurtech industry over the last decade, new alternatives to the network model have appeared. Digital market access platforms give agencies market access via subscription-based software.
These platforms advertise that they can give agencies access to dozens or even hundreds of carriers. After agencies sign up and provide basic information such as license numbers and errors and omissions insurance, they receive the ability to obtain instant quotes for different lines of coverage. Some focus on a single segment such as personal lines, commercial, or life, while others offer a spectrum of coverages. Some platforms provide guides to carrier appetites so agencies can avoid wheel-spinning. They typically offer competitive commissions and low or zero subscription fees.
Agencies considering using these platforms should fully understand what they are agreeing to, cautions Carrie Lewis of agency network Pacific Interstate Insurance Brokers (PIIB.) “Agents appreciate the platforms’ ease of use,” she acknowledged, “but in the long term, many of these platforms take ownership of the policy – a model that doesn’t align with the goals of a growing agency.” Agency principals should carefully review the user agreements for the platforms to determine who will own the expirations. Without ownership of expirations, an agency does not have the right to remarket such account.
Another important consideration is ownership of the data the agency provides. Depending on the user agreement terms, the data may belong to the technology company and not the agency. This means they can cross sell and make other offerings to the clients you place on the platform.
Many platforms do not provide services that networks traditionally offer. While they provide quick quotes, they might not provide agencies with leads or access to agency management and customer relationship management systems. They might also not be able to guarantee that an agency will have access to all their carriers.F
These platforms are in essence technology companies that provide insurance services. Consequently, they may change hands more frequently than do established insurance firms. They may begin life as startup insurtech firms, then get purchased by another insurtech, only to later be sold to another technology company or a private equity fund. Changes in ownership may bring operational changes that could impact the quality of the platform’s services. Furthermore, some of these firms never make it.
A spring 2024 report found that global insurtech investment was at its lowest point in four years. Ed Halsey of insurance management system provider Genasys said insurtech businesses must now “demonstrate clear paths to profitability.” Those that do not may be unable to raise the capital needed to keep them operating long-term.
Lewis advised that agencies should look at their long-term goals when choosing between an agency network and a digital platform. The platforms may offer short-term fixes but not long-term solutions. “Unlike online platforms, which often prioritize transactions,” she said, “we focus on building relationships and fostering independence.”
Like networks, digital platforms will differ from each other in terms of costs, extent of carrier access, ownership of expirations and data, and benefits such as training and support. Those that survive the startup phase may evolve and expand their services over time. Networks have a long history of serving agencies and often provide those services already. Smart agency principals should always weigh new options presented by innovative technologies, but they should also compare those options to the ones they had before. It’s always best to consult an attorney when signing an affiliation agreement as agreement can make or break the long term success of an agency.
