What is an agent of record (AOR)

An agent of record, sometimes referred to as a broker of record, is an individual or company authorized to represent an insured person and manage their insurance policies. This agent acts on behalf of the policyholder, handling tasks such as policy renewals, modifications, and claims, ensuring the insured’s interests are well-represented and protected.

Companies hire agents of record as service providers to avoid dealing with health insurance themselves. AORs save policyholders’ time, allowing them to focus more on strategic aspects of their business. The AOR also helps the company make smart, cost-effective decisions regarding employee benefits.

Because agents of record act as the company’s legally authorized organizational representative, they deal directly with the insurance company. The company does not need to interact with the designated insurer.

Insurers will not deal with any other entity or persons who are not the authorized agents of record for the insured party: the AOR is the mandatory intermediary.

Are you actively shopping for an insurance policy for your business? If so, you may have to sign an agent of record (AOR) or broker of record (BOR) letter at some point during the process.

Maybe you’re in the process of getting your company’s first AOR or broker. Or, you’re changing your current insurance agent or broker because their premiums are higher than the market average. Or perhaps your existing AOR hasn’t been proactive in managing your insurance coverage needs. In either case, you may have to sign an AOR to designate an agent to represent you to insurance companies.

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 which agent they want to represent their business. Business owners require an agent of record letter to replace an existing AOR.

The letter names an agent or broker as the business’s representative to negotiate premiums and coverage with a particular insurance company. This agent acts as a liaison, handling insurance quotes, insurance contracts communication, policy details, benefits administration, and non-mandatory benefits on the company’s behalf.

When an agent of record (AOR) or broker of record (BOR) signs a letter to hire a new agent, it automatically terminates the old one. Hence an AOR letter is only needed for businesses with existing policies that want to work with someone new or need help finding new policies.

When should you terminate an AOR agreement?

Here are scenarios that may call for you to terminate or change your AOR.

• You’re unhappy with the current agency’s services or communication

• Another agency has more expertise in your industry

• Your agency of record failed to foresee an important issue

• The current agent mishandled a task

• The current agent doesn’t have access to a particular market

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

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

For example, 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, it would make sense to make an agent of record change. Your business will better be protected, serviced, and monitored by the new one.

What should you know before signing an AOR letter?

Getting a new agent to manage your business insurance accounts is a relatively simple task. But thoroughly reading the new agreement beforehand is the best way to avoid problems down the line.

Note that not every AOR or BOR letter is the same. Each letter outlines the agreement’s details specific to that agent, so closely reviewing the contract details is critical.

That said, here are two things to be aware of:

You must fire your old AOR to work with a new agent: Signing an AOR means firing your old agent and hiring a new one. Because this is an official transfer, you’ll need to ensure you’re not signing it prematurely.

Exercise due diligence because brokers will not always be transparent and may try to be sneaky about AOR signing.

You may incur servicing 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 essentially working for free from the date they signed the AOR letter to the day when the policy’s effective date begins. For this reason, the agent/broker may charge you a servicing fee since the insurance carrier isn’t paying them.

Again, not all agents will tell you this upfront, so always read the contract thoroughly to avoid surprise charges or misunderstandings down the line.

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. 

• 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 letter, 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 the insurance carrier

• Phase 4: The policies are transferred in 5-10 days unless the carrier receives a rescinding AOR from the current agent signed by the policyholder 

Once the insurance carrier accepts the AOR letter, the new agency relationship begins, and the old relationship ceases to exist.

What should you do if you signed a bad AOR?

If you regret signing an agent of record, you typically have 5-10 days after signing the letter to rescind it.

To back out of a letter, you’ll need to sign a rescinding agent of record letter, which will essentially render the original AOR you signed null and void.

If you want to rescind the contract after ten days, you won’t be able to do that by signing a rescinding agent of record letter. In this case, your only option is to sign a new AOR with another agent, which will hire that agent and fire the previous one.

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