What is an AOR? How to Work With an Insurance Agent

An agent of record is responsible for buying insurance coverage for the policyholder. Find out how to sign and replace your AOR in this guide.

Stefana Zaric
Written by Stefana Zaric
March 15, 2022
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Are you actively shopping for an insurance policy for your business? If so, you may have to sign an agent of record (AOR) or broker of record (BOR) letter at some point during the process.

You may be getting your company’s first insurance agent or changing your current insurance agent or broker. Maybe their premiums are just too high above the market average, or perhaps they haven't been proactive in managing your insurance needs.

In either case, you may have to sign an AOR to designate an agent to represent you to insurance companies.

In this post, you'll learn everything you need to know about an agent of record and how an AOR or BOR can help you. We'll also discuss the appropriate times and reasons to let go of an AOR and what to do if you signed a bad agreement.

What is an agent of record (AOR)

An agent of record is a company or individual with legal authority to represent the insured and manage an insurance policy on their behalf.

Companies hire agents of record as service providers to avoid dealing with health insurance themselves. AORs save policyholders' time, allowing them to focus more on strategic aspects of their business. The insurance expert also helps the company make smart, cost-effective decisions regarding employee benefits.

Because agents of record act as the company’s legally authorized organizational representative, insurance companies deal directly with the AOR, not the client company. Insurers will not deal with any other entity or persons who are not the authorized agents of record for the insured party: the AOR is the mandatory intermediary.

Related: How to Calculate Employee Benefits

What is an agent of record letter?

An agent of record letter is a formal document signed by a business owner specifying which agent they want to represent their business. You’ll need an agent of record letter to replace your AOR.

The document names an agent or broker as your representative to negotiate premiums and coverage with a particular insurance company.

This agent acts as a liaison, handling insurance quotes, communication, policy details, benefits administration, and non-mandatory benefits on your behalf. While an agent of record (AOR) or broker of record (BOR) letter officially hires a new agent, it essentially fires the old one.

Hence an AOR letter is only needed for businesses with existing policies that want to work with someone new or need help finding new policies.

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When to execute an AOR

Here are scenarios that may call for you to change your agent.

  • You're unhappy with the current agency's services or communication
  • Another agency has more expertise in your industry
  • Your agency of record failed to foresee an important issue
  • The current agent mishandled a task
  • The current agent doesn't have access to a particular market

In most cases, policyholders choose to change their agents because they're dissatisfied with their services or when there's a communication disconnect.

Another scenario that may call for you to terminate an AOR agreement is when you perceive a significant expertise gap between two insurance agencies. For example, let's say you're in the tech business and your agent provides basic insurance services.

You later become aware of another company that has developed a specialized and tailored process for tech companies, offering cyber risk management and dedicated claims and litigation services that your business needs.

In this case, it would make sense to fire the existing AOR. Your business will better be protected, serviced, and monitored by the new one.

What to know before signing an AOR letter

Getting a new agent to manage your business insurance accounts is a relatively simple task. But reading the new agreement is the best way to avoid problems down the line.

Note that not every AOR or BOR letter is the same. Each letter outlines the agreement's details specific to that agent, so reading the contract thoroughly is critical.

That said, here are two things to be aware of.

You must fire your old AOR to work with a new agent

As mentioned earlier, signing an AOR means you're firing your old agent and hiring a new one. Because this is an official transfer, you'll need to ensure you're not signing it prematurely.

Exercise due diligence because brokers will not always be transparent and may try to be sneaky about AOR signing.

You may incur servicing fees

AORs don't get paid for the whole year if the agreement is executed in the middle of a policy term. They essentially are working for free from the date they signed the AOR letter to the day when the policy's effective date begins. For this reason, the agent/broker may charge you a servicing fee since the insurance carrier isn't paying them.

Again, not all agents will tell you this upfront, so always make sure to read the contract thoroughly to avoid surprise charges or misunderstandings down the line.

How does the AOR process work?

The AOR process begins once you've decided to work with a particular agent. The actual AOR process takes about ten days:

  • Your new agent sends you an agent of record letter with your company's name, carrier's name, the policy number, and the effective policy date
  • You review the letter, read it thoroughly, put it on your company's letterhead, sign it as an acknowledgment of receipt, date it, and send it back to the agent
  • Your new agent sends the signed AOR letter to the insurance carrier
  • The policies will be moved in 5-10 days unless the carrier receives a rescinding AOR from the current agent signed by the policyholder 

Once the insurance carrier accepts the AOR letter, the new agency relationship begins and the old relationship ceases to exist.

What to do if you signed a bad AOR

If you regret signing an agent of record probably because you didn't read the agreement thoroughly, don’t panic. Typically, you have 5-10 days after signing the letter to rescind it.

To back up on a letter, you'll need to sign a rescinding agent of record letter, which will essentially render the original AOR you signed null and void.

If you want to rescind the contract after ten days, you won't be able to do that by signing a rescinding agent of record letter. In this case, your only option is to sign a new AOR with another agent, which will hire that agent and fire the previous one.

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