What is a Broker of Record Letter?
In the insurance business, a broker of record letter or agent of record letter is basically a letter of authorization that you, as the insured can use to fire your existing agent and hire a new agent to handle your business insurance with the insurance company you currently have. Often this is done on the renewal date, but in some instances, you can transfer authority to a new agent mid-term. The broker of record letter gives you, the insured, the power to select who you want your broker or agent to be.
The most common trigger for a broker of record letter or change of authorization is when you, the business owner is shopping around your business insurance renewal for a better price. Here’s an example of how it unfolds. Agent #1 submits your account to an insurance company for a quote. Another agent your working with, we’ll call them Agent #2 goes to that same insurance company and finds out they are what we call blocked from getting a quote. This is because insurance companies will only work with one agent or broker to issue quotes. So Agent #2 approaches you and asks you to sign a broker of record letter to authorize them to get a quote from this insurer. If you sign that letter you are effectively tossing out agent #1 and replacing them with Agent #2 to get that quote, and this is where BOR letters can get sticky, and where I recommend caution.
Let me take a step back. I highly recommend that you select who you want your agent or broker to be first when it comes to your business insurance. By putting your account out to bid with multiple brokers you allow the insurance company with the lowest quote to select the broker you will work with this upcoming policy term.
I’ve done another video on why this may not be in your best interest and you can view that here.
What about Broker of Record Letters in the Middle of a Policy Term?
There are situations when an insured becomes really dissatisfied with their agent. Certificates are not issued promptly, customer service is terrible, and the relationship has broken down terribly. This is when the insured can select a new agent to represent them with their current insurance company and take over the servicing of their account. This is also achieved by signing a broker of record letter.
Be cautioned, some insurers will not accept mid-term broker of record letters, which is really unfortunate, because if the situation you’re in is dire, then the new broker will likely need to move you to a new insurance company and that makes life difficult on everyone.
Now, sometimes these authorization letters can be used in a manner that’s not professional so caution is needed when a new broker you’re working with to get quotes asks you to sign one. Some unscrupulous insurance brokers will try and slip this letter in front of a client, ask them to sign it, and not give them any explanation of what it is, or what it does, or what will happen next.
If that happens, your current broker will be informed that they are being removed from getting a quote with that particular insurance company. This will of course lead to a phone call or visit from that broker who feels threatened or has their feelings hurt. If you don’t intend on firing your current broker – don’t do this as it really will disrupt your relationship with them.
The second reason is that if you do sign the broker of record you’re causing some disruption with the underwriter at this insurance company that you’re trying to get a quote from – they now think – “what’s going on here? Is my quote only going to be used as leverage against other underwriters to lower the price? What broker has control of this account? Is it just about the price, is there no relationship here?”
The point is that if not handled properly by the new agent, that disruption and the questions the underwriter is asking will not lead to a great quote. That’s basic human nature.
Here’s the bottom line.
The broker of record letter is your tool to select what agent you want to work with getting quotes and managing your account. That power should be handled properly so that you’re selecting the right agent first.
You should ask yourself, before signing over authority, does the agent you’re selecting have the service capacity to manage your account? Do they offer tools and resources outside of just a policy to help you manage risk? Are they an expert in their field? Do they have expertise in your industry? Do they have positive testimonials and reviews? Most of all do you like and trust the agent you’re selecting?
Have other questions regarding business insurance or risk management? I love helping business owners with their protection program, so I’d love to speak with you, feel free to give me a call or drop me an email.