Other Collaboration Agreements
Other options include "franchisor" or "aggregator" organizations. Unlike agency networks, these agreements generally involve an override or profit element for the individual or entity that controls participation in the group. Such organizations provide some of the benefits of a network, but do not provide the mutual support among member entities and an equal voice in the management of the group, which are characteristics of true networks. Franchisors or aggregators do however represent a valid alternative to relieving some of the market pressures independent agents experience. Many of the decision criteria discussed in this article with respect to joining a network would also apply to becoming involved with a franchisor or aggregator.
Though "brokering" relationships between agents may involve collaboration, they do not qualify as agency networks. These arrangements involve a voluntary sharing of commissions for business placed by an agent that does not hold a particular insurance company appointment, through an agent who does have an appointment with that company. Laws and regulations vary from state-to-state with respect to the legality of "brokering," and the notification the two agents must provide to the policyholders. This type of arrangement is often times unknown to the insurance carrier and is generally governed by informal understandings between the two agents. This method is frequently seen when market capacity crises emerge, and agents have little or no options for meeting the immediate coverage needs of their customers.
Conclusion
The purpose of this article is to present a broad overview of some of the primary issues and questions to be answered when an agency is considering membership in an agency network. To some degree, every agency network is unique. Membership in a network involves benefits, restrictions, and responsibilities. It is important that all parties fully understand these in advance.
This article was originally published in the Summer 2011 edition of Resources Magazine.
