Have you ever been presented with a fairy tale narrative by your broker, only to be disappointed a few months into your policy? Wish you could change the broker managing your policies? Well, we have good news. Whether you are a startup leader seeking insurance coverage or an individual requiring specialized insurance solutions, entrusting a Broker of Record (BOR) via a BOR letter can effectively address any of your insurance concerns. But what does BOR mean? And how can you establish a solid relationship with one?
What Is BOR?
You may be wondering: “What’s all the fuss about BOR? I’ve already got my insurance broker.” Well, there are a few differences you should be aware of.
An insurance broker does all the research to help a client choose a policy in the first place, often earning a lump sum percentage against the first-year premium and then a smaller, ongoing annual payment over a policy’s life. However, someone who buys insurance through a broker still needs to speak with their insurer in case of a claim.
On the other hand, a BOR is a person an insured individual designates to represent and manage their insurance policy — and these brokers receive a commission from insurance companies. They are often responsible for all communications about policies on behalf of the policyholders, including reviewing quotes and notices from the insurer and negotiating with the insurance company. They may also advise the policyholder to change existing insurance policies and file claims on the insured’s behalf.
A BOR serves as a middleman between the insurance company and the insured so that policyholders can reduce the expenses associated with their insurance policy. Moreover, a BOR often has relationships with various insurance carriers and has extensive knowledge regarding the range of policies available.
Don’t forget, though, a BOR also has a fiduciary duty to the policyholder, meaning they must disclose any conflicts of interest and fulfill their legal and contractual obligations — or they may be liable to the policyholder for damages.
The BOR Meaning and Importance for Policyholders
Imagine you own a small manufacturing business, and a few years ago, you purchased a commercial property insurance policy with the assistance of a trusted insurance broker. They helped you identify the ideal coverage and even negotiated competitive rates. However, as time passed, you inadvertently overlooked the importance of periodically reviewing your insurance policy and renewing your agreement with the BOR (Broker of Record). You may be wondering, “What is a commercial insurance broker?” To your surprise, you continued paying insurance premiums directly to the insurance company without fully comprehending the potential consequences of this oversight.
Then, a fire breaks out at your manufacturing facility, causing significant damage. But when you report the incident to the insurance company, you discover that your policy had lapsed due to non-renewal. You are no longer represented by a BOR, and outdated coverage means you are not adequately protected against fire damage.
Without BOR representation, you missed important policy updates and had to navigate the complex claims process alone. This example shows that a BOR is needed to:
- Ensure the continuity and consistency of insurance coverage
- Maximize cost savings through effective policy management
- Act as the authorized representative for insurance negotiations
- Streamline communication between the insured and insurance carriers, especially when negotiating claim settlements to receive fair compensation
- Provide ongoing guidance and support about policy renewals and the insurance market.
The BOR Letter Is the Vital Missing Piece
A BOR letter is a document designating a BOR for the first time. Or, if you’re moving your business to a new brokerage, a BOR letter tells the insurers that you are replacing your broker for a new one. The letter legally establishes the relationship between the insurance provider, insured, and broker.
These letters are particularly essential if you are dissatisfied with your current insurance broker’s level of service: Maybe you want a broker with whom you can discuss seasonal fluctuations and their impact on your business, but currently, you hear from your broker once a year — right before renewal. Or perhaps you meet a new broker who provides loss prevention assistance or stronger negotiating expertise than your current one.
Changing your broker is as easy as ordering an Uber. All you need to do is sign the letter and give it to your chosen broker. They’ll pass it on to the insurance carrier, and that’s it.
However, without this official letter and the insurance broker in place, many consequences may follow:
- A lack of centralized insurance management and coordination
- Potential gaps in coverage or overlapping policies
- Difficulty in managing claims and resolving insurance-related issues.
Selecting a BOR and Establishing a Strong Relationship
By understanding the legal and contractual implications of a BOR, you can help ensure that your insurance policy is properly managed and your interests protected.
The first two tell-tale signs of a trustworthy BOR are:
- They are licensed in the jurisdiction where they are doing business.
- They have a good reputation and evident experience in the insurance industry.
It would be best to consider their industry specialization, reputation, ability to meet your specific insurance needs, and legal considerations. Initially, it’s vital to stress how important regular communication and collaboration is to you too. For example, remember it is common courtesy to let your current agent know if you are working with another broker for competing quotes — that can keep the relationship solid. In turn, they will grant you transparency on everything too.
When you are ready to sign your BOR letter, watch out for the wording. If you’re choosing only to allow the new broker to represent you on your property portfolio, don’t sign a BOR that gives the broker access to all your insurance policies. Remember, the BOR officially terminates your relationship with your current broker, so they can no longer negotiate on your behalf. So ensure the BOR letter clearly outlines which carriers your new broker can approach.
And lastly, signing a BOR will not rectify insurance coverage errors. Only a thorough review of your account by the new broker will correct any issues. And that should be one of the first things your new broker does when you choose a new policy with them: a complete coverage review.
Like any legal document, understanding the effects of a BOR can be challenging for the typical commercial insured. At Founder Shield, we take pride in becoming your BOR and facilitating strong broker-client relationships. We want you to focus on your business and leave the rest to us! Feel free to contact us; we’ll walk you through finding the right policy.