What Is A Broker of Record Letter?

Published: 12th January 2012
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A broker of record letter, more commonly known as a BOR, is a statement that a company can sign to designate who will represent them in their insurance purchase. It is issued directly to the insurance company to indicate which agency can receive quotes and information related to the insured. It is not necessary to have a BOR and most companies donít use one in their insurance purchase.
They are typically used when a company wants to switch brokers and move its insurance to a different agency for service. If the request for a quote or other information has already been received by the insurance company, it wonít release the information to another broker without a BOR from the insured.
In theory, they make sense. But in practice, we are not too fond of BORs at Hall & Company. Unfortunately, they are used mostly as a tool to manipulate the competitive process in a way that we feel is underhanded. We do not ask our clients or prospective clients to sign them.
Usually a BOR comes into play after a broker has developed a good quote and beat another broker fair and square. If the losing broker can convince the company to sign a BOR in his favor, he can take over the winning quote and end up getting the account. We donít feel that this is a good way to earn business or build trust so we donít do it.
There are certain times when we will take a BOR. When a client comes to us because they are unhappy with their current broker and they want to move their insurance mid-term, or when we place a policy for a new client and they want to move over their other policies so that they can have their servicing all in one place. So basically, we will take a BOR at the request of our client, but we will not ask for one in order to tilt the playing field in our favor.
Excess & Surplus Lines Insurance companies are different in the way that they operate with regulatory agencies. But in terms of the way that the policy will function for the insured, it is just like any other and it will respond to claims in the exact same way.
The main difference is that these companies are not admitted to do business in a certain jurisdiction. This means that their taxes to the jurisdiction are assessed separately, and that their rates and policies have not been filed and approved with an insurance commissioner. Also, they do not participate in state guarantee funds.
They are regulated within their own jurisdiction and monitored by the individual states. And there is a Central Fund in which they participate that is intended to pay claims in the event of insolvency just as the state guarantee fund is.
There are a lot of advantages to working with the surplus lines market. Because they are not beholden to particular rates that have been filed, they are able to be more flexible in their pricing and can evaluate a firm on itís individual merit rather than relying solely on how the particular business class has performed in the past.
The classic idea of surplus lines covering unconventional or harder to place types of firms is also true. They will often offer terms and coverages markets canít or wonít.
So, itís definitely worth considering surplus lines because the underwriters have greater leeway and sometimes more risk tolerance and you may be able to get more competitive pricing or broader coverage as a result.
First of all, you have to have a special license in order to sell these types of policies, and it has a reputation of being difficult to attain. We have been licensed surplus lines brokers for more than 20 years and are very familiar with the market place.
Aside from the licensing issue, a lot of agents steer their clients away from surplus lines markets simply because they donít understand what it is and they are afraid to use it, or they want to avoid the extra work of filing the policies and taxes.
It is unfortunate, really, because it promotes apprehension about surplus lines carriers when in fact there is no reason for an insured to view them differently than any other insurance company.

Sandee Watson is a Senior Associate at Hall & Company, http://www.hallandcompany.com, an insurance brokerage firm that specializes in the placement of professional liability insurance for design firms and consultants. Sandee has worked with the design community for more than 15 years providing services in many areas including marketing and recruiting. She has focused solely on insurance for Architects, Engineers, Land Surveyors, and Environmental Consultants since 2005.

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