The Broker of Record (BOR) designation represents an authorized relationship between a client and an insurance professional, serving as a formal declaration of representation. This arrangement is commonly used across property and casualty, health, and employee benefits lines of coverage to assign a single agent or firm to manage the client’s account. Establishing a Broker of Record ensures that the insurance carrier recognizes one specific entity as the client’s sole representative for all policy-related matters. This structure is foundational to maintaining clear communication and accountability in complex insurance dealings.
Defining the Broker of Record
The Broker of Record is the single agent or agency that the insurance carrier legally recognizes as having exclusive rights to manage a client’s specific policies. This designation is established through a formal client authorization, granting the BOR the necessary standing to act on the policyholder’s behalf. The BOR is the only entity authorized to receive policy information, negotiate terms, and handle communications directly with the insurer. This status grants an exclusive authority, meaning no other brokerage can perform these actions for the client regarding the designated coverage unless the BOR designation is formally transferred. The legal status of the BOR is distinct from other brokers who might simply provide quotes or offer advice.
The Primary Function of a Broker of Record
The primary function of establishing a Broker of Record is to provide centralized and authorized representation for the policyholder. This centralization ensures a single point of contact is responsible for ensuring the client’s best interests are met throughout the policy lifecycle. The BOR manages the client’s entire risk portfolio with the carrier, overseeing policy details, endorsements, and claims communication. They act as the sole intermediary, translating the client’s needs to the insurer and communicating the insurer’s requirements back to the client. This focused authority is necessary for efficient negotiation, especially during renewal periods.
The Broker of Record Letter
To formalize the BOR relationship, the Broker of Record Letter (BOR Letter) is utilized. This is a formal, written document that must be signed by the policyholder or an authorized representative of the client organization. The letter serves as proof of the client’s intent to either appoint a new broker or switch representation from an existing one. Essential components required include the full name of the client, the specific policy numbers or lines of coverage affected, and the requested effective date of the change. Furthermore, the letter must clearly state the names and contact information of both the previous and the newly appointed broker or agency. This communication is subject to strict carrier guidelines and state regulations regarding proper notification and the timeline for the change.
The Process of Appointing a Broker of Record
Executing a change in representation requires the client to follow a specific step-by-step process to appoint a new Broker of Record. The process begins with the client making a definitive decision to engage a new brokerage firm for their insurance needs. Once the decision is made, the new broker assists the client in drafting and formally signing the official BOR Letter, which is then submitted directly to the insurance carrier. The carrier initiates an internal review process to authenticate the letter and verify the client’s authorization. Following approval, the carrier determines the official effective date, which is the point at which the new broker assumes full authority. Many carriers enforce specific blackout periods, during which BOR changes may be restricted or denied.
Implications of Designating a Broker of Record
A successful Broker of Record designation carries several significant administrative and financial consequences for all parties involved. The most direct financial result is the transfer of commission rights, meaning the new Broker of Record immediately becomes entitled to receive the compensation paid by the carrier for that specific policy. Simultaneously, the previous broker’s authority to act on the policy immediately ceases, and they lose access to policy-specific information and the ability to negotiate on the client’s behalf. The client’s policy information and data control are effectively transferred to the new BOR, cementing their role as the authorized contact. Some carriers implement a “revocation” or “protection” period, allowing the incumbent broker a short window to contest the change or for the client to revoke the letter.
Key Differences Between a BOR and a Servicing Broker
A distinction exists between a Broker of Record and a broker who merely provides services or quotes, primarily centered on the concept of formal authority and exclusivity. Many different brokers may engage with a client by providing quotes, answering general questions, or offering informal advice on coverage options; these are considered servicing brokers. Only the Broker of Record holds the formal, exclusive authority recognized by the carrier, an authority explicitly backed by the signed BOR Letter. This exclusive designation empowers the BOR to legally bind coverage, receive direct policy commissions, and negotiate specific policy terms and conditions with the insurer.