What is a Broker of Record?
A Broker of Record is the Person who Represents You
In the insurance industry, a broker of record is a person who represents an insured and maintains a policy on their behalf. This agent or broker was chosen by the insured to represent them and administer their insurance policy. This agent serves as the person who represents you before an insurance company.
The broker of record represents the policyholder, not the insurance company. They work for you.
The broker of record is in charge of all policy-related correspondence and collects insurance provider quotes and updates on behalf of the policyholder. A broker of record may sometimes inform a policyholder of changes that should be made to an insurance policy.
A broker of record represents the policyholder when negotiating with insurance companies. When a customer employs a broker of record, they have a professional who knows the insurance landscape on their side. This reduces the expense of an insurance policy and saves them from making poor decisions. These brokers are retail brokers, and they might work with wholesale brokers or directly with insurance carriers on your behalf.
An independent insurance agent has relationships with many different insurance companies, and the broker often has extensive knowledge of the policies available. In many cases, the broker of record has experience working with specialized insurance companies, and they can find the best policy that covers your business needs.
Broker of Record Letters
A Broker of Record letter (“BOR”) is a legal contract in which you, as a business owner, authorizes an insurance agent as your representative. A new BOR officially terminates your existing relationship with an insurance agent/broker, and transfers it to a new agent.
An insurance company will only work with one insurance broker for a particular customer. Typically, an insurance company will recognize the first broker who contacts them about a customer. If other insurance brokers contact the insurance carrier asking for insurance for the customer, the insurance carrier will refuse to release any information concerning insurance coverage.
The ACORD Broker of Record form can be found here.
When would you want to sign a BOR letter?
There are two situations where you would sign a Broker of Record letter.
The first is when you want to designate a broker to represent you during the quoting process. In some cases, an agent will obtain quotes without a BOR letter. In cases where you want to hire a new broker, a broker of record letter allows that new broker to contact your existing insurance carrier and ask for new quotes or negotiate better insurance coverage.
The second situation is where you want to keep your existing insurance company but wish to change from your current insurance agent. The new insurance agent will be listed on the broker of record letter, and the insurance company will deal with the new broker rather than the old one.
Difference between BOR Letter vs. Letter of Authorization
A broker of record letter authorizes an insurance broker to negotiate on behalf of a customer with an insurance company to create new policies. A letter of authorization does not.
A letter of authorization allows a specific person to settle a claim on behalf of an insured. The person names in the letter of authorization can agree with the insurance company for individual settlements.
Why Would a Broker of Record Be Necessary?
One of the primary reasons for signing the Broker of Record letter is that you are authorizing an insurance broker to negotiate insurance contracts on your behalf. The insurance market is very complex, and your insurance broker of record can find the best insurance coverage for your specific needs.
Once the insurance broker knows your specific needs, they can talk to underwriters to explain your situation and obtain the best rates.
Your insurance requirements have a lot of confidential information, including your track record of claims, the reasons behind your risks, and so forth. Insurance companies are not authorized to discuss this confidential information with anyone other than an authorized agent. The Broker of Record letter is how you authorize someone to discuss insurance matters on your behalf.
Is there a reason I shouldn’t sign a BOR?
As much as there’s a good reason to sign a BOR there’s a reason for being cautious about a BOR. It’s legal documents, so you should be careful when examining these documents and make an informed judgement about the documents you’re signing. It’s advisable to be careful if the agent has indicated that the application is to be submitted to a company on your behalf. Especially if there’s a need for multiple agent applications for different insurers in one place. If you want more information on what you are signing, ask a representative.