What is an agent of record (AOR)

An agent of record is an individual or agency authorized to represent an insured person in coverage-related matters and manage their insurance policies.

AORs act on behalf of policyholders, handling tasks such as policy renewals, modifications, and claim submissions. Their job is to ensure that your insurance needs are well-represented and protected.

See also: How to mitigate misclassification risks with Deel’s contractor of record (COR)

What does an agent of record do?

Companies hire agents of record as service providers to avoid dealing with insurers. AORs save policyholders’ time, allowing them to focus on the more strategic aspects of their business.

Because agents of record act as the company’s legally authorized insurance representative, they deal directly with the insurance company.
Insurers will not deal with any entity or persons other than your authorized agents of record; your AOR is the mandatory intermediary.
Your AOR, thus, does the following:

• Shop for suitable covers for your team
• Represent you in third-party insurance-related negotiations
• Advise you on insurance policies and claims
• Adjust and renew your policies, usually at their discretion

In other words, your Agent of Record is the person you trust to manage all your insurance concerns.

Why do companies hire AORs?

Most companies hire AORs to oversee their insurance policies, particularly health insurance and workers’ compensation.

While every Agent of Record is different, most offer the following services:

Policy management

Your AOR oversees all your insurance policies, from selection to renewals and extensions. This task includes:

• Researching available policies
• Selecting and signing up for suitable policies
• Organizing and storing paperwork
• Requesting policy amendments
• Revising your policies to ensure compliance

Risk assessment

AORs conduct risk assessments to identify potential areas of risk and exposure for your company. Following an assessment, they recommend policies and strategies to help you mitigate them.
An AOR may also audit your existing policies and recommend benefits, coverages, and payroll adjustments, depending on your company’s needs and team size.

Claims advocacy

If any claims arise from your current policies, your Agent of Record acts as your advocate. They schedule and handle communications and negotiations with claimants and insurance companies, representing your best interests in all filed claims.
In this sense, your AOR deals directly with your insurers, so you don't have to. Their primary job in claims advocacy is to secure you the best outcome.

Professional advice and guidance

You may hire an AOR for their industry expertise. In this capacity, they advise you on selecting and managing your coverage options, insurance policies, claims, benefits packages, and insurance risks.

This service is almost always tailored to small businesses that cannot yet afford to hire a full-time AOR.

Compliance tracking

Because insurance is such a compliance minefield, AORs monitor regulatory changes, especially those surrounding labor and payroll laws, and update their policies to ensure compliance.

Your AOR may adjust your policies to include FMLA, COBRA insurance, business travel insurance, and other coverages state and federal governments prescribe for certain businesses.
This service is almost always tailored to small businesses that cannot yet afford to hire a full-time AOR.

How does the AOR process work?

The AOR process begins once you’ve decided to work with a particular agent and takes about ten days to complete. It includes the following steps:

• Phase 1: The new agent sends you an agent of record letter with your company’s name, carrier’s name, the policy number, and the effective policy date
• Phase 2: You review the agent of record form, read it thoroughly, put it on your company’s letterhead, sign it as an acknowledgment of receipt, date it, and send it back to the agent
• Phase 3: Your new agent sends the signed AOR letter to your insurance carrier
• Phase 4: The insurance carrier transfers your policies to the AOR within 5-10 days unless they receive a rescinding AOR from the current agent signed by the policyholder

Once the insurance carrier accepts the AOR letter, your new AOR relationship begins, and any previous contracts become null and void.

What are the benefits of having an AOR?

Hiring an Agent of Record offers the following benefits:

Time and resource savings

Delegating all your insurance-related tasks to an insurance expert frees up your time to focus on your business. You don't need to spend time shopping for, managing, and renewing policies. AORs are also often more cost-effective than having an in-house tax team.

Peace of mind

In all their dealings, AORs are paid to represent your best interests. You delegate all your insurance concerns to them and trust them to run everything in a manner that serves your wider company goals and ROI needs.

Expertise and advocacy

AORs are insurance experts. They use their knowledge of the industry, market, and insurance regulatory frameworks to get you the best policies and claim outcomes.

Convenient representation

Dealing with insurance companies can be a hassle. AORs handle all insurer communications, taking that task out of your hands.

Personalized coverage

As a new or growing business, it's easy to purchase every policy you see regardless of whether it suits your needs. AORs customize your policy portfolios, picking and adjusting coverages depending on your team's size, budget, location, applicable laws, etc.

What are the possible downsides of having an AOR?

Like any hire, AORs may compromise your organization if they act unscrupulously or outside your company policies. Possible downsides of hiring an Agent of Record include:

Limited options

Your policy options are only as comprehensive as your AOR's partnerships and industry affiliations.
If your AOR is relatively new to the business or only willing to work with a few insurers, they may provide a very small sample size of policies for you to choose from. These policies may offer inadequate coverage or fail to meet your goal and budgetary needs.
The best way to tackle this problem is to hire an established AOR with many industry affiliations and discuss your insurance needs at length before signing any contract.

Potential conflicts of interest

Because they work in the insurance business, AORs may have existing relationships with insurers. They may purchase policies based on these relationships rather than in your best interests, saddling you with high premiums and incomprehensive coverage.
Some AORs may even receive incentives and kickbacks from insurers.
To avoid this risk, only work with reputable AOR firms and individuals with a track record of success and reliability.

Dependency

Relying solely on an Agent of Record for your insurance needs may limit your understanding of and control over your policy frameworks. You may not understand your company’s insurance needs, which could lead you to purchase inadequate or unnecessary policies and make misinformed decisions.

High costs

Especially for small businesses, hiring an AOR may not make financial sense. AORs charge a fee for their services, which is offset by the many and complex insurance needs of large organizations. This may not be the case for small firms. If you terminate your contract early, AORs may charge you for missed payments.

What is an agent of record letter?

An agent of record letter, or broker of record letter, is a formal document signed by a business owner specifying the agent they want to represent their business.
It names an agent or broker, your representative, to negotiate premiums and coverage with a particular insurance company.

It authorizes them to act as your liaison, handling insurance quotes, insurance contract communication, policy details, benefits administration, and non-mandatory benefits on the company’s behalf.

Who needs an AOR letter?

You must sign a new agent of record letter to replace any existing AOR. Signing a letter to hire a new Agent of Record automatically terminates the old one.

You may also sign an AOR letter to appoint your first Agent of Record. Relying solely on an Agent of Record for your insurance needs may limit your understanding of and control over your policy frameworks. You may not understand your company’s insurance needs, which could lead you to purchase inadequate or unnecessary policies and make misinformed decisions.

What factors should I consider before signing an AOR letter?

Hiring an AOR to oversee all your insurance activities is a serious business decision. Before signing an AOR letter, consider the following:

• Not every AOR or BOR letter is the same. Each letter outlines the agreement details specific to a given AOR. Review the contract details closely, preferably with your legal team.
• You must fire your old AOR to work with a new agent. Because this is an official transfer, do not sign an AOR letter prematurely.
• Brokers are not always transparent about their existing insurer relationships and fees. Exercise caution and consider several options before signing an AOR
• You may incur service fees: AORs don't get paid for the whole year if you terminate the agreement in the middle of a policy term. The AOR is working for free from the date they signed the AOR letter to the day the policy's effective date begins. For this reason, the agent/broker may charge you a service fee since the insurance carrier isn’t paying them.

Again, not all agents tell you this upfront, so always read the contract thoroughly to avoid surprises or misunderstandings.

Why would I terminate an AOR agreement?

In most cases, policyholders choose to change insurance agents because they’re dissatisfied with their services or there’s a communication disconnect.

You may want to terminate an existing AOR relationship because:

• You’re unhappy with the current AOR’s services or communication policy
• Another agency has more expertise in your industry
• Your agency of record has failed to foresee a vital issue
• Your current agent has mishandled a task
• Your current agent doesn’t have access to a particular market you need

Another scenario that may call for you to terminate an AOR agreement is when you perceive a significant expertise gap between two insurance agencies.

Let's say you're in the tech business, and your agent provides basic insurance services. You later become aware of another company that has developed a specialized and tailored process for tech companies.

This company offers cyber risk management and dedicated claims and litigation services that your business needs. In this case, making an agent of record change makes sense because this new AOR will protect, service, and monitor your policy needs better.

Do I need an AOR for my global team?

Yes, although EORs offer better protection.

Your AOR may help you manage global employee benefits and legally-mandated insurance obligations. Their understanding of payroll and insurance laws may also be useful when hiring contractors and remote workers internationally across different jurisdictions.

However, AORs do not assume your financial or legal liabilities; they represent your interests in insurance matters. For more coverage and support when hiring and managing global teams, an employer of record (EOR) offers more comprehensive cover, taking on all HR and compliance risks.

See also: 5 ways to offer health insurance to remote workers

What is the difference between EOR and AOR?

While an Agent of Record manages your insurance policies, your EOR manages all employment administration tasks. This includes:

• Payroll
• Talent acquisition and management
• Benefits administration
• Legal compliance

See also: A comprehensive guide to EOR and international hiring

Track and manage your contracts and policies with Deel

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We help you understand and deliver mandatory benefits to employees in foreign countries and help you administer additional perks to attract top talent.

Our EOR services are comprehensive, covering all HR and administrative tasks, including employee benefits, hiring and recruiting, and insurance compliance.

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