What is a BOR?

A broker of record (BOR) also known as a broker of record (BOR), is an entity that carries out actions for an insured party. The BOR can legally manage insurance policies on a company’s behalf. Since BORs become the company’s authorized representative, the company doesn’t need to interact with the insurance company.

Companies hire a broke of record to handle health insurance and employee benefits so the business can focus on strategic initiatives.

How can employers start working with BORs?

The BOR process begins when companies choose a broker. The process can take around ten business days to complete and consists of the following phases:

• Phase 1: The new broker sends an employer a broker of record letter with the company’s name, the insurance carrier’s name, the policy number, and the policy date
• Phase 2: Employers review the letter with a legal entity, sign it as an acknowledgment of receipt, date it, and send it back to the broker
• Phase 3: The new broker sends the signed BOR letter to the insurance carrier
• Phase 4: In 5-10 days, the policies are transferred

What is a broker of record letter?

An BOR letter is a document that identifies a broker to represent a business. The letter permits the broker to perform duties for the business, such as negotiating insurance plan costs with insurance companies.

BOR letters are a legal necessity for businesses that want to replace one BOR with another. When an BOR letter is signed by both parties, it replaces the previous agreement.

What do companies need to know before signing an BOR letter?

Enlisting an broker to manage an insurance account is a fairly simple process, but it’s important to thoroughly read the agreement with a legal team to avoid issues down the road.
A few areas to note are:

Businesses must fire the existing BOR before working with a new broker: This is a bureaucratic process, so it’s important to read the fine print before signing. This includes officially parting with the existing BOR before starting a relationship with another.

Letters may incur servicing fees: If a business ends an agreement with an BOR in the middle of the policy term, the BOR does not receive payment for the entire year. To make up the difference, the broker may charge a servicing fee since they aren’t paid by the insurance carrier.

When should you terminate an BOR agreement?

There are several reasons why a business would want to terminate or change their BOR:

• They’re unhappy with their agency’s services or communication
• Another agency has more relevant expertise
• The broker made costly mistakes on a task
• The broker isn’t familiar enough with a particular market

In practice, a healthcare business may terminate an BOR agreement if their current broker can only provide basic services and they find someone who specializes in cyber security and patient safety. In this case, it makes sense to swap the current broker for the new company to keep the business secure.

Who pays an BOR?

Insurance companies require broker of record letters that state who the company selected as their representative and when communicating with the insurance carrier. In return, the broker earns commissions from the insurance company.

How does the BOR process work?

The BOR process—which takes about ten days to complete—starts as soon as a business chooses to work with an broker. It’s broken down into four phases:

• Phase 1: The company chooses an BOR that meets their needs and the broker sends a signed broker of record form with the following details: the company’s name, insurance carrier’s name, policy number, and the policy date.
• Phase 2: The business reviews the letter, signs, date it, and send it back to the broker.
• Phase 3: The new broker sends the signed BOR letter to the insurance carrier.
• Phase 4: The policies are transferred between 5-10 days.

Once the insurance carrier accepts the BOR letter, the new agency relationship begins.