Here at Baily Insurance Agency, we meet business owners and operators every day that for one reason or another have become dissatisfied with their current insurance agent or insurance company. Maybe their premiums have just gotten too high. Maybe they want to shop around a little to see if they can find better rates with a different insurance company. Maybe their insurance agent hasn’t been proactive in helping them manage their insurance needs.
When this happens, before we begin working with a new client, we sometimes ask them to sign a Broker of Record (BOR) letter.
Maybe you’ve been asked to sign one, too.
In that case, you need to understand exactly what you’re signing. Usually, when we make this request we are met with this question: “What is a Broker of Record Letter?”
To help you understand this important document, I want to explain to you what a BOR is, and I also want to help you understand when it is helpful, why it is helpful, and why your agent is asking for it!
What exactly is a Broker of Record (BOR) letter?
Essentially, the Broker of Record letter is a contract in which you, as a business owner, designate an insurance agent (or broker) as your representative to an insurance company. Usually, your new insurance agent will draft the letter for you, you will sign and return it, and then the new agent will present it to the insurance company.
This Broker of Record letter officially terminates your relationship with your current agent and allows a new agent to represent you to insurance companies that you want to quote your insurance policy.
Because this letter is a legally binding contract, it is important to understand what you are agreeing to and how it will impact the quoting process.
To simplify, there are only two occasions when you will be asked to sign this letter: when you want to designate an agent to represent you during the quoting process or when you want to switch insurance agents while staying with the same insurance company.
Designating an Agent During the Quoting Process
During the quoting process, a BOR designates which insurance agent you want to represent you to an insurance company.
You see, an insurance agent acts as a broker between you and insurance companies. It is your agent’s responsibility to fill out any applications and to communicate on your behalf to insurance companies. It is also their responsibility to help you file any claims with your insurance company and to help you find ways to lower your premium costs.
The insurance companies, then, provide you with insurance coverage. Insurance companies determine your policy premiums and pay out any claims that you submit.
So, how does a BOR help me?
As a policyholder, you can not work directly with an insurance company.
A Broker of Record letter informs the insurance company which agent will be representing you.
For example, if you want to receive a quote from Cincinnati Insurance, by signing a BOR you can designate which insurance agent has your permission to apply to Cincinnati Insurance on your behalf.
Why would I want to designate only one agent?
An insurance company will only recognize a commercial insurance application for your business from one agent. If a second agent also applies, the second application will be disregarded.
This is a little-known fact that has a great impact on the quoting process!
What if I want to receive quotes from multiple insurance companies?
Sometimes you may want more than one insurance agent to apply on your behalf.
Let’s say that Insurance Agent A has a great relationship with Travelers and Donegal Insurance Companies, but is not approved to apply for insurance with Auto Owners. You would want to designate Insurance Agent A to apply on your behalf to Travelers and Donegal.
Now let’s say that Insurance Agent B has a great relationship with Auto Owners, an insurance company that you would also like to give you a quote. You might want to designate Insurance Agent B to apply on your behalf to Auto Owners.
In this case, you can choose which agent you want to represent you to each company. You can assign one agent to represent you to certain companies while assigning another agent to represent you to other companies.
To do this you may need to submit a BOR for each company you are asking to quote your insurance.
What if I don’t submit a broker of record letter?
In the three to six months before your insurance renewal, various insurance agents will begin to solicit your business to ask if they can quote your next policy. At the same time, your current agent will be eager to keep your business.
If your current agent senses that you are currently dissatisfied with the service they have given you, your current agent might apply to an insurance company or even fill out a partially complete application before you have signed a BOR designating a new agent. They would do this to eliminate competition.
How does this eliminate competition?
Remember insurance companies will only recognize the first application submitted on your behalf. Even if an application is only partially done, an insurance company will not accept an application from anyone else on your behalf.
Once your current agent has filled out an application on your behalf, no one else will be able to apply for insurance coverage with that insurance company.
So I need a BOR to guarantee who represents me to the insurance company?
This is especially important if you are dissatisfied with your current agent and want another agent to apply on your behalf. A BOR will effectively keep anyone from submitting a subpar application on your behalf. And once a new BOR is signed, any old BORs are null and void.
Designating a New Agent While Retaining the Same Insurance Company
The other occasion when you may want to submit a Broker of Record letter is when you are satisfied with your insurance company, but dissatisfied with your current agent.
Let’s say that your current agent has not been in touch with you for months. Also, you feel as though they have not done a good job helping you manage your claims and finding solutions to help you keep your insurance premiums low. You like the coverage the insurance company has given you, but you feel strongly that your agent has not done all that they could to help you.
In a case like this, you might want to keep your insurance policy with the same insurance company, but want a different insurance agent to manage your account.
Insurance companies are loyal to agents and will not allow you to switch agents unless you sign a BOR. However, once you sign a BOR, your current insurance agent will no longer be able to represent you to the insurance company.
How does a BOR work in this case?
Generally, you are only able to switch agents at your renewal date. Without a BOR, an insurance company will not permit you to work with another agent.
For example, let’s say that Joe Smith currently has his commercial insurance with Cincinnati Insurance. He is very pleased with his coverage. And, any time Joe has had to call Cincinnati Insurance with a claim, they have been very attentive! Joe likes his policy with Cincinnati Insurance.
At the same time, Joe’s insurance agent (we’ll call him Bill) has not been as attentive. Bill has not returned phone calls or emails. Bill has not advised Joe on what he could do to help lower his insurance premiums. And, in fact, this year, Bill made some mistakes on the application which resulted in some gaps in Joe’s insurance coverage. Joe is not happy working with Bill!
In this case, if Joe wanted to work with another agent to renew his policy with Cincinnati, he would need to sign a BOR. The BOR would inform Cincinnati Insurance that Joe wanted to terminate his working relationship with Bill and begin working with the new agent.
Once the insurance company receives a BOR stating your desire to change agents, your new agent can apply on your behalf.
How do I submit a BOR?
Your new agent will draft the BOR and ask you to sign it. Then, the new agent will submit the letter on your behalf to the insurance company. This letter is a legal contract that ends your relationship with your current agent. The letter also serves as a legal contract permitting your new agent to act on your behalf.
Should I let my current agent know that I am switching agents?
It is a good idea to call your current agent and explain to them that you will be working with another agent to renew your insurance. Most times your current agent will try to discourage you from making a switch.
You should also know that your current agent will have ten days to submit a counter letter that you would sign letting the insurance company know that you have changed your mind and do not want to switch agents. Most likely, they will try to persuade you to sign a counter BOR so that they do not lose your business.
If you do not call your current agent, they will be notified by the insurance company that another agent will be representing you. If you have had a good relationship with your current agent, it is most courteous to contact them yourself. This will keep you in good standing with that agent if you ever want to hire them again to represent you.
Are there reasons I shouldn’t sign a BOR?
Do keep in mind that just as there are very good reasons to sign a BOR, there are also reasons to be cautious in signing one. Because this is a legal document, you will want to examine it very closely to make sure you understand what you are signing.
One thing you should watch for is any language indicating that you are agreeing to let the agent apply on your behalf to all insurance companies. This is especially important if you want multiple agents to apply on your behalf to different insurance companies.
If you have questions about what you are signing, be sure to ask your agent.
What Else Should I Know If I Am Considering Switching Agents?
Quoting commercial insurance is a very complicated process. Before making this decision, you should evaluate what your current agent is providing for you.
While finding you the best coverage and pricing are important to any business, your agent should be providing you additional tools and expertise that will help mitigate your insurance costs.
At Baily Insurance, we are committed to helping our clients find the right coverage and pricing while also helping them with long-term savings and benefits. We only want to be your agent if we are the right fit for you.
If you are dissatisfied with your current agent and would like help with your next steps, get in touch with us by requesting a consultation or give us a call at (724) 627-6121.