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Do you know what a Broker of Record (BOR) is? You may be familiar with the term if you’ve ever worked with an insurance agent, or you might be encountering it for the first time if you’re exploring how to offer insurance to your employees. Either way, since 60% of workers say benefits are important to their overall job satisfaction, it’s a good idea to understand how a broker of record can help your business offer great insurance benefits to your team.
Simply put, a broker of record is a person who interacts with your insurance company to manage your insurance and is legally authorized to act on your behalf, receive communications, and represent you. If they do a good job, your BOR will also explain everything and help you feel confident about any insurance-related decisions you make for your business.
Read on for all the ins and outs of your relationship with a broker of record, differences between brokers and insurance agents, and when you may need a BOR letter.
What will a Broker of Record do for your business?
Your Broker of Record will manage insurance policies on your behalf and should understand the priorities most important to you — whether it’s watching your budget, keeping premiums low, limiting deductibles, or procuring broad coverage. As you enter into a relationship with a BOR, ensure these priorities are clear and communicated so that the broker can find the most appropriate plan options for you and your business.
Independent brokers have access to a variety of insurance companies and policies. Based on your needs, they’ll present a few insurance quotes for plans that may be the best fit. Basically, they represent you in the insurance marketplace and work to secure the best deal for what you’re looking for. A BOR also serves as your point of contact to answer any questions you may have about the plan — adjusting it if necessary — and can assist with filing claims.
Insurance brokers vs. insurance agents: what’s the difference?
So, what exactly is the difference between a Broker of Record and an insurance agent? Both serve as intermediaries between the insurance company and policyholders. In addition, both brokers and agents must have appropriate licenses and certifications to distribute the insurance they are selling, and both also make commissions based on the plan and your premiums.
However, brokers represent the buyer, whereas insurance agents represent specific insurance companies. This is an important distinction to understand.
In addition, a broker typically offers a wider variety of plan options because they have access to policies from multiple companies, and these options are generally more personalized to your needs. Because brokers represent the buyer rather than the insurance company, their recommendations tend to be less biased and in your favor.
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How does the process work?
In the simplest terms, insurance companies depend on brokers to provide applications and clients for evaluation and quoting. Only one broker is assigned to each policy and insurance companies pair brokers with clients on a first-come, -first-served basis. In other words, whichever insurance broker is the first to submit a complete application to the underwriter on behalf of their client becomes the broker of record and will ultimately manage the account going forward.
Generally, the BOR is the client’s first choice, but there could be some exceptions. It’s common practice for clients to talk to a few different brokers to get the widest variety of plan options. But because many insurance brokers have access to the same insurance companies, they could possibly receive multiple applications on behalf of the same client. However, the insurance company will only provide a quote to the first broker who submitted a complete application.
Although it’s not that common, it’s possible that the client’s first choice broker didn’t get the application to the insurance company quickly enough. So, what can you do if this happens to you and you’re not completely satisfied with the services provided to you? Sign a broker of record change letter.
What’s a Broker of Record letter?
A broker of record letter is a document to establish the relationship between the broker, you as the policyholder, and an insurance company. These letters are typically used to initiate a relationship with a broker or to replace your existing broker with a new one.
If you’re unsatisfied with the services of your current agent or have been offered a better plan from another broker, a broker of record letter can be used to transfer the rights to manage your policy from one broker to another. Usually, your new insurance broker is responsible for drafting the letter — you sign and return it — and then the new broker will present it to the insurance company. At that point, the previous broker has no more access to information or changes that can be made.
Before signing a broker of record letter and undertaking such a transfer, it’s important to be sure your new broker has the experience and necessary licenses to provide you with the plan you need.
A broker of record letter can be used to accomplish the following:
- Suspends the rights of the current broker to communicate adjustments with the insurance company on your behalf
- Gives rights solely to the new broker to manage your account going forward, including the ability to manage plans with insurance companies
- Provides the new broker access to any policy details or other information related to your insurance policy only. For example, they may receive future communications, including a renewal quote.
When you sign a broker of record letter, your current broker is notified by the insurance company.
Also, if you sign a BOR letter and have second thoughts, you do have some time to rethink the decision, but it’s not an infinite period of time: usually, you’ll have ten days or less to rescind the letter or to issue a reversing BOR letter, which needs to be sent to the carrier.
Ultimately, if you decide to go in another direction, you may hear from the broker trying to offer you a better policy, or asking you why you are considering a broker change; it’s not uncommon for brokers to reach out in a last-ditch effort to earn back your business.
A quick explanation to your current broker detailing the main reasons you have decided to switch usually allows for a more seamless change.
What does a Broker of Record letter include?
Usually, the contents of a broker of record include specific information about the group plan, including the name of the group plan, the selected broker, the effective date of the broker designation, and any specifics under which the broker designation can be terminated. Sometimes there might be an agent ID — to switch all lines of coverage this month or next — most are pretty generic but it depends on the carrier.
Broker of record letters usually appear on your company’s stationary or letterhead, and do not need to be flashy. Here’s an example of a broker of record letter:
In some instances, carriers require a specific BOR letter and have templates that have to be used as is — and if you deviate from it, you may get a letter back from a legal department saying it needs to be sent again formatted exactly as the template shows.
Broker of record bottom line
Ultimately, it’s important that you as the policyholder feel a broker has your best interest at heart, and that you feel taken care of. Before you sign up for a policy with any broker do your homework and explore your options, taking the time you need to ensure you find the right plan — and the right broker — for your business.
Please note all material in this article is for educational purposes only and does not constitute tax or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice.