In the world of insurance, the topic of Broker of Record Letters (BORs) has recently gained a lot of attention. This is a subject that can evoke strong emotions, particularly in someone like me who is deeply passionate about the insurance industry and serving my clients. It's a topic that separates the honest agents from those who are only chasing commissions. In this article, I aim to provide you with a clear understanding of BORs and their significance, without the need for a rant.
Understanding Broker of Record Letters (BORs)
A Broker of Record Letter, often referred to as a BOR, or an Agent of Record Letter (AOR), is a document that a client signs when they want to access a specific insurance market for obtaining quotes. In the United States, insurance carriers are typically bound to provide terms to only one agency. This means that two different agencies cannot offer quotes/terms for the same carrier. Moreover, the law states that once a carrier has quoted terms for an agency, those terms, rates, and premiums must remain the same – even if an AOR or BOR is received.
Beware of Dishonest Agents
Regrettably, there are dishonest agents who will mislead clients by insisting that they must sign a BOR to obtain quotes, claiming that they can secure better terms. This is a blatant lie. The only thing such agents can do is reduce their own commissions or fees. Any agent who is desperate enough to take over another agent's work should raise suspicion. A reputable agent doesn't need to BOR someone else's quote; they have their own business to attend to. They respect the hard work and expertise of other agents who have tailored programs and specific coverage forms to meet their clients' needs. A commission reduction is not worth sacrificing expertise and honest hard work.
When Is a BOR Necessary?
While BORs are generally discouraged, there are situations where they are necessary. For example, a client may simply not want to work with their existing agent and wishes to proceed with another one. In such cases, I have occasionally accepted a BOR to audit the account, leading to a full rewrite or change of the business based on my own risk management and transfer recommendations. Sometimes, other agencies may attempt to write programs similar to mine but can't secure all the necessary layers or forms due to a lack of relationships, volume, or knowledge. In such cases, we might have to broker one of the layers to complete our full program. Throughout this process, we prioritize honesty and integrity, allowing the client to inform their agent or facilitating the conversation ourselves.
Next Steps
Making Informed Choices
Now that you understand the basics of BORs and when they might be necessary, it's crucial to know what steps you should take when confronted with this situation:
- Question the Necessity: If another agent suggests signing a BOR, question the necessity and understand why they believe it's needed. Be cautious of any agent who pushes for this without a clear explanation.
- Seek Alternative Solutions: Before signing a BOR, explore alternative solutions with your current agent. There may be ways to address your concerns without changing agents.
- Consult a Trusted Advisor: Reach out to a trusted insurance consultant or advisor for an unbiased opinion. They can help you navigate the decision and ensure you're making an informed choice.
- Consider the Long-Term: Think about the long-term implications of changing agents. Are the potential savings worth sacrificing the expertise and dedication of your current agent?
In conclusion, allowing another agent to take over an existing agent's hard work, underwriting, and knowledge in exchange for a commission reduction is simply bad business. The agent who put in the effort to understand the scope of risk, create a submission for quoting, and negotiate the terms will receive no commission, while the agent who did no work will reap all the rewards. Clients who knowingly engage in such practices are not the kind of clients I want to do business with.
A Final Word
Your insurance agent is a crucial part of your business circle, just as important as your attorney and accountant. Whether it's for a specific project, risk assessment, or an annual program, they should be treated with the respect and trust they deserve.
I hope this article has shed light on the truth behind Broker of Record Letters and when they are genuinely appropriate, albeit rarely. If you have any questions or need further guidance on this topic, don't hesitate to reach out to a reliable and honest insurance consultant. Make informed decisions and prioritize the long-term benefits of your insurance relationships.
