I HEAR many agencies brag about how successful their clusters have been–but I rarely hear anything from those involved in all the unsuccessful ones. (By "cluster," I am referring to a limited number of agents who combine certain aspects of their operations and collectively do business within a relatively small territory-rarely statewide.) Keep in mind that every time a cluster is created, it eventually must be dissolved, which usually is quite problematic. Agencies involved in clusters often do not have a clue about the mess that awaits them until it is too late to do anything about it.

The two most common reasons I hear agents give for forming clusters are to gain access to companies and to increase contingencies. The first reason does make some sense for very small agencies. However, if company access is the main reason for forming a cluster, joining a national or regional cluster or agency network probably makes more sense. Furthermore, these larger clusters and networks aren't affected by eventual breakups to the degree smaller clusters are. Indeed, these larger groups often give members the option to sell their book of business to the cluster upon their retirement, in accordance with a predetermined valuation formula.

Agents who don't find the idea of joining a large cluster or network acceptable should consider accessing companies through brokers instead. This often is an easier and better solution to the market-access problem than a cluster is. Additionally, brokers generally pay reasonable commissions.