What Does a Broker of Record Mean in Insurance?
Demystify the Broker of Record concept in insurance. Learn how to designate and manage your official broker for policy representation.
Understanding specialized terms and procedures in insurance is important for policyholders to effectively manage their coverage. A clear grasp of these concepts empowers individuals and businesses to make informed decisions regarding their insurance needs.
Understanding the Broker of Record
In the insurance industry, a “Broker of Record” (BOR) is an agent formally designated by a policyholder to manage and represent their insurance policies. This designation grants the broker explicit authority to interact with the insurance carrier on behalf of the policyholder. The BOR facilitates communication and handles various policy-related tasks.
Policyholders choose to designate a broker as their BOR for professional guidance and access to a wider range of insurance options. The broker assumes responsibilities such as negotiating terms, evaluating quotes, and recommending changes to existing policies. This representative works to secure suitable coverage and assists with claims, renewals, and endorsements. The BOR receives compensation, often in the form of commissions, directly from the insurance company for their services.
The Broker of Record Letter
The Broker of Record Letter is a formal document used to officially inform an insurance carrier about a policyholder’s decision to appoint a new broker or change an existing one. This letter establishes the legal relationship between the policyholder, the new broker, and the insurance company. It is particularly relevant when a policyholder seeks to change brokers while maintaining their existing insurance policies with the same carrier.
A typical Broker of Record Letter includes essential information for a clear transition. This includes the policyholder’s name, relevant policy numbers, the effective date of the broker change, and contact details for both the outgoing and incoming brokers. The letter formalizes the policyholder’s intent, providing the insurance company with the necessary documentation to recognize the new broker as the authorized representative.
Process and Implications of a Broker of Record Letter
Once a Broker of Record Letter is signed by the policyholder, it is typically submitted to the insurance carrier by the newly appointed broker. Upon receipt, the insurance company processes the letter, officially designating the new broker as the primary point of contact for the specified policies. Carriers often have a waiting period, commonly between three to ten business days, for the transition to take place and to allow for any rescission.
A Broker of Record Letter has several immediate implications for the policyholder and the involved brokers. The new broker gains access to policy information, including underwriting details and proposals, and becomes responsible for all future communications with the insurer regarding renewals, endorsements, and claims. Simultaneously, the authority of the previous broker to negotiate or manage those specific policies ceases. The former broker is typically notified by the insurance company of this change, and in some instances, may have a limited timeframe to submit a letter to rescind the change.