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Making sure you have the right business insurance policy with an agent or broker who has your best interests in mind can be stressful. If you make the wrong choice and aren’t happy with your agent, it’s not always a quick and easy process to get a new one, and it will often require a broker of record or agent of record letter.
But if you aren’t an expert in insurance like we are at Berry Insurance, you might not know what a BOR or AOR letter even is, and you could be unaware of everything you’re getting into when you sign one.
That’s why we’re here to help! Read on to learn more about BORs and what you need to know before you sign one.
So what exactly is a broker of record letter?
Simply put, a broker of record letter is a letter that states a business’ intention to work with a specific broker or agent.
This agent (like the ones who work here at Berry Insurance) acts as a liaison, handling insurance communications, quotes and policy details on behalf of the policyholder.
While a BOR letter officially hires a new agent, it also essentially fires the old one.
When you might need a BOR letter
A BOR letter is not necessary whenever you get a new insurance agent. It is generally used in only two circumstances:
You want to keep your policy, but switch agents
If you are for some reason unhappy with your insurance agent, we don’t blame you for not wanting to stick around. But you also might not want to go through the process of getting a new carrier if you are happy with your current insurance carrier and policy.
So you can sign a BOR to stay with your insurance carrier, but work with a different agent.
You want to keep quotes, but switch agents
You may also need a BOR letter if your business has received quotes from your current agent, but you want to fire that agent and have a new one take over their quotes.
In this situation, it could actually be feasible to sign more than one BOR letter at a time.
For example, say your business has coverage with The Hartford and your current agent got you quotes with Hanover, Liberty and Safety. If you want to switch agents, that new agent would need BOR letters for all the carriers in order to be able to negotiate the quotes for your business.
If you plan on switching agents, it's important to choose one you can trust. So before you choose, read our guide on why your business insurance agent should provide more than just Insurance.
What to know before you sign a BOR letter
So you want to get a new agent for your business insurance accounts and you know it will require a broker of record letter. It seems simple enough -- if you have no choice but to sign a broker of record letter, then there really shouldn’t be anything to worry about, right?
Not so fast.
Not every broker of record letter is the same. Each letter outlines the details of the agreement specific to that broker, so that means you need to carefully read each agreement before signing.
Here are a few things to be aware of.
You’re agreeing to work with them and fire your old agent:
As we’ve already gone over, signing a BOR means you’re firing your old agent and hiring the new one.
Because this is an official transfer, you need to make sure you aren’t signing it prematurely.
(You should also make sure any employees who are able to sign contracts on behalf of the company run signing a BOR by you first, so they don’t make any detrimental insurance decisions for the company.)
Let’s be honest -- in the world of business when people are trying to close a deal, you can’t always trust them. Plenty of brokers are not completely transparent, and may try to be sneaky about BOR signing.
Trust us, we’ve heard of plenty of stories about people looking for quotes from various carriers and having an agent tell them they need to sign a form in order to obtain insurance quotes for them. Well this form is actually a BOR and when the prospect signs it, they unknowingly agree to fire their agent and hire the new agent before even getting quotes.
For this reason, when you are looking for quotes, make sure you are reading all paperwork carefully and not agreeing to transitioning agents before you are ready.
You may be agreeing to servicing fees:
Another thing to note about brokers of record is that they don’t get paid for the whole year if the BOR is established in the middle of a policy term. They essentially are working for free from when they establish the BOR letter to when the policy effective date begins, at which point they will begin earning a commission from the insurance carrier.
For this reason, some agents will charge a servicing fee to the policyholder since they aren’t yet being paid for the insurance company. These servicing fees can range from a thousand dollars up to tens of thousands of dollars depending on the size of the account and other factors.
Again, not all agents may tell you this up front, and if you don’t read your contract thoroughly, you might end up paying for something you didn’t expect to.
What to do if you’ve signed a bad agreement
If you’ve come across this article because you are regretting signing a BOR, not to worry. There are things you can do.
Depending on the agent, you likely have 5-10 days after signing the letter to rescind (cancel) it. To do that, you will sign a rescinding broker of record letter, which will essentially make the original BOR you signed null and void.
Note: If you’re choosing to rescind, the new agent will probably try to schmooze you a bit to retain you as a client. But remember, even if they are promising a lot, you probably don’t want to work with somebody who wasn’t transparent with you about what you were signing in the BOR.
If you’re having a delayed buyer’s remorse and want to terminate your contract after the 5-10 days, you won’t be able to sign a rescinding broker of record letter, but there might be other things you can do.
To get out of your contract you might be able to sign a new BOR with another agent, which will hire that agent and fire the previous. This will terminate your relationship with the agent, but you will still be responsible for any fees you incurred while working with them. However, depending on the insurance company, you may not be able to get out of the contract until the policy period is over -- so again, you need to be very careful with what you sign.
Don’t just skim your contracts:
If you haven’t already picked up on it, the moral of the story here is always read your contacts thoroughly. Several aspects of your business are riding on you doing your contract due diligence, so don’t just skim!
Insurance agents may make signing a BOR letter seem like a simple, procedural task, but if you aren’t aware of the terms and costs to you, you could end up regretting your decision and choice of insurance agent.
After all, insurance is confusing and complicated enough and the purpose of an agent is to guide you through it and make it easier for you.
That is actually our philosophy at Berry Insurance, so we might be able to help you. Check out this article Can Berry Insurance (a Small, Independent Agency) Handle my Commercial Insurance Needs?" to see if we might be a good fit for all your business insurance needs.
