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Are you on the quest to choose the best insurance policy for your business? If you nodded a ‘yes’, you may have to give your assent to signing an Agent of Record (AOR) or Broker of Record (BOR) letter at some point of time. Whether you are planning to partner with an AOR for the first time or wish to change your current AOR partner because of higher premiums as compared to the prevailing market average, this blog will guide you through the entire process right up to the part when you would have to sign an AOR to select a lawful agent who will represent your business before insurance companies. But before we get into understanding what things you need to know before signing an AOR letter, let’s get into the basics of unfurling what is an AOR.

So, without further ado, let’s delve deeper into the details concerning an Agent of Record.

Table of Contents

• What is an AOR or Agent of Record?
• How Does an Agent of Record Work?
• What is an AOR or Agent of Record Letter?
• What is an Agent of Record Change- ACORD Form?
• How Does an Agent of Record Change Work?
• What are the Pros and Cons of Choosing an Agent of Record Partner For Your Business?
• Top 4 Things That HRs/Employers Need to Know Before Signing an AOR Agreement
• When Might You Feel the Need to Terminate an Agent of Record Agreement?
• What is to be Done if You Signed a Bad AOR?
• Agent of Record Vs. Employer of Record- How Do They Differ?
• Agent or Broker of Record Vs. Letter of Authorization
• Frequently Asked Questions- What is an AOR

What is an AOR or Agent of Record?

An AOR, that stands for Agent of Record, is an entity (can be an individual or a company) that  is authorized to represent an insured party. Also known as Broker of Record, an AOR possesses the legal power to look after the management of insurance policies on the behalf of the other party. Apart from managing the insurance policies of the insured party, an AOR undertakes various other tasks such as handling renewal of policies, making necessary modifications, claims, etc., while ensuring that the interests of the insured party are kept on priority and well-protected.

Businesses hire AORs to get help with the monitoring of health insurance policies. This helps them save significant hours that would otherwise have been spent in getting into the nitty-gritty of insurance-related activities. Partnering with an Agent of Record enables companies to let go of the persistent stress of checking policy changes or updates, managing claims, and so on. In that way, having an AOR as a third-party service provider to assist you in insurance management, helps you focus on core business activities. This is because you can leave all compliance-related worries to your Agent of Record partner and be at ease. However, this is not all. A strategic aspect of an AOR is that it steps in to help you take smart, budget-friendly decisions while framing the employee benefits plan.

Having an Agent of Record as your legal partner relieves you of the hassle of interacting with the insurance company. However, it is important to note that only an AOR can function as the intermediary party. This translates to the fact that insurance companies cannot interact and communicate with any other entities that are not authorized Agent of Record partners.

Suggested Read: What is Fractional HR? Know Why Your Business Needs This 

How Does an Agent of Record Work?

An Agent of Record (AOR) works as a representative or intermediary between your business and an insurance company or service provider. The role of an AOR is crucial in ensuring that your insurance needs are met effectively and that your company receives the best possible coverage and support. This is how it works:

1. Understanding Client Needs: The process begins with the AOR understanding your insurance requirements, business operations, risks, and objectives. This includes conducting thorough discussions, assessments, and analysis to gain insight into the specific needs and priorities that your organisation has.

2. Researching Insurance Options: Based on your needs and preferences, the AOR researches and evaluates insurance options available from various insurance companies or service providers. This involves comparing coverage, pricing, terms, and conditions to identify suitable options that align with your requirements.

3. Recommendations and Proposals: After researching insurance options, the AOR will present you with recommendations and proposals. This includes you receiving the recommended insurance policies, coverage options, and premiums.

4. Negotiating with Insurance Providers: Once the client selects insurance coverage, the AOR acts as the liaison between the client and the insurance company or service provider. The AOR negotiates terms, conditions, pricing, and other aspects of the insurance policy to ensure that the client receives favorable terms and optimal coverage.

5. Managing Insurance Policies: After the insurance policies are in place, the AOR manages the ongoing administration of the policies. This includes handling policy renewals, endorsements, changes, updates, and any claims or issues that arise during the policy term.

6. Providing Ongoing Support: Throughout the relationship, the AOR provides ongoing support to the client. This includes monitoring changes in insurance regulations, assisting with compliance requirements and addressing client inquiries or concerns.

Suggested Read: PEO Vs EOR: Differences & Why Does It Matter For Your Business?

What is an AOR or Agent of Record Letter?

An Agent of Record letter, also known as Broker of Record letter, is a legal document that establishes which agent a business owner wishes to represent on the behalf of the company. Once the business owner signs this document, the chosen agent gets the power to communicate and negotiate policy details with the insurance company for the business. This spares businesses from getting into the complexities of checking insurance policies, coverage options, claims, etc., because the Agent of Record will take responsibility of these crucial roles. When a business signs a new AOR letter, it automatically replaces the existing AOR partner.

The letter aids in bringing clarity as to which agent or broker is going to serve as the representative of the business while assisting with policy changes or updates, submitting insurance applications, negotiating premiums, managing claims processes, and providing expert advice. If a business owner wishes to switch to a new Agent of Record partner, signing a new AOR or BOR letter is a must. It would then automatically imply that the association with the previous AOR partner has been terminated. Therefore, an AOR letter’s need arises only when businesses with existing policies wish to switch to a new AOR partner or wants to explore new policies in the market.

What is an Agent of Record Change- ACORD Form?

To put things simply, an Agent of Record change form refers to a document that needs to be signed to change representation and select a new AOR partner. To make this change and finalize the new AOR partner, the ACORD form is sought. This very request to change the AOR partner is known as ACORD 36.

Often, businesses take the decision to switch to a new agent either because they are unhappy with the existing services or looking for expert agents having prior experience in industries like finance, tech, and so on. In order to cease working with the existing Agent of Record partner, signing the Agent of Record Change- ACORD form is a must. The signed form then needs to be sent to the current agent or broker to expedite the transfer process to a new agent.

Rescinding Agent of Record Letter

A rescinding Agent of Record (AOR) letter is a formal document that you use to revoke or cancel the designation of an AOR partner. You need to send this letter to your current AOR partner to:

• notify them of the decision to terminate the AOR relationship
• withdraw the AOR’s authority to represent the client in dealings with insurance companies or service providers

The rescinding AOR letter usually includes details such as:

• Effective date of the termination
• Reasons for the decision
• Any outstanding obligations or responsibilities
• Instructions for the transfer of relevant documentation
• Information to a new AOR, if applicable.

Note: It is crucial to follow any contractual or legal requirements regarding the termination of the AOR relationship. Further, ensure that the rescinding letter is delivered in a timely manner to avoid any disruptions in insurance-related matters.

Suggested Read: Types of Employment Contracts 

How Does an Agent of Record Change Work?

Now that you have gained an in-depth idea about what is an AOR, let’s understand how this entire process of starting to work with an agent looks. There isn’t any rocket science involved here. So, the AOR process begins right after you have selected a partner and signed the Agent of Record Agreement. It takes about 10 days for the entire process to complete.

Let’s have a look at the stages of Agent of Record Process:

Stage 1

The new agent, with whom you are about to associate your business, will send you an Agent of Record letter- including the following details:

•  Name of your company
• Name of carrier
• Policy number
• Policy date from when it will be effective

Stage 2

Once you have received the Agent or Broker of Record letter, it is time to review it attentively. Make sure that you go through its contents with utmost care. After you are done checking the document, sign it to acknowledge that you have received it, put the present date, and send it back to the agent.

Step 3

Now it is turn for your new agent to send the signed AOR letter to the carrier of the insurance company.

Step 4

The policies then get transferred in a span of 5 to 10 days unless the insurance carrier receives a revoking Agent of Record from the present agent duly signed by the policyholder.

Step 5

Once the Agent of Record form gets accepted by the insurance carrier, a fresh association with the new agent begins while the relationship with the old agent stands cancelled.

Suggested Read: Employer of Record USA- The Complete Guide 

What are the Pros and Cons of Choosing an Agent of Record Partner for Your Business?

Choosing an Agent of Record partner can help you streamline business operations so that you can focus on driving growth and enhancing revenue. You won’t have to worry about the various range of compulsory tasks related to insurance management as your agent will be there to take care of these aspects. However, if this is your first time exploring the option of AOR agreement, weighing both its pros and cons is essential. Let’s find out what these are:

Pros of Partnering with an AOR

1. Saves Time & Cost to a Great extent

An AOR helps you save significant amounts of time that would otherwise have been spent on taking care of truckloads of administrative tasks. In addition to all that you have to do, taking care of policy renewals, coverage changes, staying up-to-date with new policy changes, etc., is sheer amount of work. That’s where an Agent of Record steps in to carry out all these tasks so that you get to concentrate on expanding your business. For instance, let’s take into consideration the task of submitting claims.

Your AOR partner will handle the entire task of submitting claims on your behalf by submitting all the necessary documents and ensuring fair processing of claims. Therefore, having a third-party partner to take care of your insurance policies, will help you save time and cost as you would be able to focus on the strategic aspects of your business and drive it towards the peak of growth.

2. Expert Consultation & Advice

A really great thing about an Agent of Record (AOR) is that it plays a crucial role in helping companies access expert advice in various areas. Firstly, they have deep knowledge and experience in the insurance or service industry they represent, allowing them to provide informed guidance and recommendations to their clients. AORs stay updated with industry trends, regulations, and best practices, ensuring that companies receive the most relevant and up-to-date advice.

Embarking on  a work relationship with an Agent or Broker of Record will help you in deciding the type of coverage you need by assessing risks and exposures unique to it. With the emerging trend of hiring independent contractors globally, companies now feel the need to design the best benefits package for their workforce. Delegating all these work to your agent will help you let go of the stress of these additional tasks. An Agent of Record also helps you choose the best policy suitable for your business by comparing insurance packages of various companies and bringing to the table the right one- fitting your budget and needs.

3. Offers Great Peace of Mind

Partnering with an Agent of Record (AOR) offers companies a significant boost in gaining peace of mind regarding their insurance and related matters. AORs are experts in navigating the complexities of insurance policies, ensuring that companies have the right coverage tailored to their unique needs and risks. By working closely with an AOR, companies can rest assured that their insurance requirements are thoroughly assessed, their policies are appropriately structured, and any potential gaps or risks are identified and addressed proactively. AORs also handle claims and negotiations with insurance providers on behalf of the company, alleviating the stress and hassle of dealing with such matters directly. This partnership not only provides comprehensive insurance solutions but also instills confidence and peace of mind, allowing companies to focus on their core operations and strategic initiatives without constantly worrying about insurance-related issues.

4. Serves as a Powerful Advocate & Intermediary for Companies & Connecting With Insurance Companies

An Agent of Record (AOR) serves as a powerful advocate for companies by representing their interests and advocating on their behalf in various situations. Whether it’s negotiating insurance terms, resolving claims disputes, or advocating for fair treatment from service providers, AORs use their expertise and industry knowledge to ensure that companies receive the best possible outcomes. They also leverage their relationships with insurance companies or service providers to advocate for favorable terms, competitive pricing, and customized solutions that align with the company’s requirements.

Cons of Working With an AOR

Working with an AOR can attract certain drawbacks, that include:

1. Restricted Choice

Depending on the agreements and relationships the AOR has with insurance providers or service providers, you may face limited options or flexibility in choosing policies, coverage, or service providers. This can sometimes lead to less competitive pricing or fewer choices compared to directly shopping around. As a result, you may lose out on the chance to choose the most competitive price on the market.

2. Conflict of Interest

There may be instances where the AOR’s incentives or commissions are tied to specific insurance products or service providers, which could create a conflict of interest. This might influence the AOR’s recommendations or decisions, potentially leading to choices that may not align perfectly with your company’s best interests.

3. Communication Challenges

While not always true, communication challenges between your company and the AOR partner you have chosen- may not be as transparent or efficient as desired. This could lead to misunderstandings, delays in addressing issues, or difficulties in accessing timely information or support.

4. Dependency

Relying heavily on an AOR for all insurance and related matters can create a sense of dependency, where companies may not fully understand or have control over their insurance policies, terms, or options. This could pose challenges if there are changes in the AOR’s services or if you want to explore alternative solutions for your company.

Suggested Read: EOR UK- The Ultimate Guide to Hiring in UK Easily 

Top 4 Things That HRs/Employers Need to Know Before Signing an AOR Agreement

Choosing a new AOR partner and entrusting them with the management of your company insurance policies is not something tricky to begin with. However, staying cautious of every agreement terms mentioned in the Agent of Record letter is highly advisable. After all, who likes encountering problems going ahead?

Every Agent or Broker of Record letter is distinct. Therefore, treating all these documents as identical is a mistake. Make sure to pay heed to the contract terms mentioned in the Agent of Record form before sealing the deal with your sign.

1. Make Sure That You Have Enough Clarity of the Reasons For Which You are Making the AOR Change

Before hopping on to a new Agent of Record agreement, it is very important to gain enough clarity about the reason for which you are making the change. Is it because you want better services, enhanced expertise, more expanded coverage or lower rates? No matter what the reason is, ensure that you have specified the factor for the broker of record change clearly. While narrowing down on a new agent, do check if it matches all your requirements.

2. Conduct Research on the Agent’s Qualifications & Experience

Embarking on a new AOR relationship without assessing the agent’s past performance and experience may not turn out to be a prudent thing to do. Make it a point to focus on your chosen agent’s previous track record as to how they dealt with clients in an industry similar to yours.

3. Ensure That Your Have Fired Your Old Agent to Work With a New AOR Partner

A direct implication of signing a new Agent of Record agreement is that you are breaking your ties with the old agent. Since signing an Agent of Record change form would mean an official transfer of agents, make sure that you do it with severe caution after giving serious thoughts on it. Therefore, make sure that you are not doing it casually.

Staying vigilant and diligent in these matters is crucial. You may never know when the brokers are bearing a deceptive intent. That is why, signing an Agent of Record letter with due care and prior understanding of its aftermath, is much needed.

4. Stay Informed of Servicing Fees to Avoid Confusions Down the Line

If you revoke the Agent of Record agreement while in the middle of the ongoing policy tenure, the agent doesn’t get paid for the entire year. This means that the AOR partner, in actuality, is working at zero charges- starting from the day the Agent of Record letter was signed to the day when the policy is implemented. That is the reason for which the agent may demand from you servicing charges because the insurance carrier wasn’t paying them all this while. Do note that this is something you won’t get to know from the agent or broker directly. Therefore, it is very important to read all the minute details laid down in the contract. In that way, you won’t be faced with any non-disclosed or hidden charges and get embroiled in any sort of misunderstanding with your agent.

Suggested Read: EOR India- A Detailed Guide on Employer of Record 

When Might You Feel the Need to Terminate an Agent of Record Agreement?

You might consider terminating your existing agreement and switching to a new Agent of Record partner owing to a variety of reasons. The triggering factors for an Agent of Record change can be any one of the following:

• You are looking for a better agency that offers more apt expert advice, holds more knowledge about various aspects related to insurance, and has vast experience working with clients belonging to the same industry as yours
• You are searching for a particular insurance market (suiting your business niche) that your current AOR partner can’t access at the moment
• The existing Agent of Record partner is no longer succeeding at meeting your expectations, be it in terms of service, responsiveness or resolution of problems
• Your present agent failed to complete a task properly or couldn’t communicate to you an issue that could have been avoided

Further, if the AOR engages in unethical practices, violates legal or regulatory requirements, or fails to comply with industry standards, termination of the agreement may be necessary to mitigate risks and ensure compliance. Often, choosing an AOR partner that has prior experience in handling insurance policies unique to your domain is essential. For instance, businesses in finance, health care or real estate may have exclusive requirements pertaining to the industry to which they belong. In such a case, selecting an Agent of record partner having prior experience in those markets is going to be beneficial. This will help you get the much-needed peace of mind because you will know that your company has the coverage it needs and your business is well-insulated from risks.

What is to be Done if You Signed a Bad AOR?

Often, your chosen Agent of Record partner may fail to meet your expectations or hold on to what services they promised. If you regret signing a bad Agent of Record agreement, don’t worry. This is because, as a standard, you will have a time period of 5-10 days after signing the AOR letter to revoke it.

So, what can you do to stop moving ahead with a bad AOR agreement? The solution lies in signing a revoking AOR letter. Doing so would result in the original Agent of Record letter to be deemed as null and void.

If you wish to cancel the agreement after ten days of signing it, the procedure to do so is a bit different. In that case, you will have to sign a new Agent of Record agreement with an altogether new agency, which in turn will appoint the new agent and disengage the previous one.

Suggested Read: Hire Employees in India Through EOR

Agent of Record Vs. Employer of Record– How Do They Differ?

Agent or Broker of Record Vs. Letter of Authorization

Frequently Asked Questions- What is an AOR

 1. What are the benefits of an Agent of Record or AOR?

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.