An agent of record, also called a broker of record or AOR, is an entity with legal authority to represent an insured party and manage an insurance policy on its behalf.

An AOR serves as the intermediary between a policyholder and the insurance company. An agent of record’s responsibilities may include the following:

  • Handling policy renewals and changes
  • Submitting claims
  • Negotiating settlements
  • Serving as the contact between the insured and the insurance company

Additionally, an AOR may evaluate and select a company’s employee benefits, such as health insurance, life insurance, and retirement plans.

A company may also work with an AOR to manage its international contracts' administrative and regulatory aspects, including payment and ensuring compliance with local tax regulations. 

Why do companies use AOR services?

Companies often hire AORs to administer and manage their insurance coverage. AORs also assist companies with benefits packages, especially when they have distributed employees worldwide with different global employee benefits needs.

AORs also help global companies navigate the complexities of engaging contracts. As contractor regulations vary between countries, an AOR ensures compliance with contractor classification, mitigates legal and financial risks, and provides administrative support.

An AOR doesn’t assume a company's legal or financial liabilities, so companies seeking a third party to manage distributed workforces across foreign borders on their behalf often partner with an employer of record (EOR) instead to handle all HR and employment functions.

Pros of working with an agent of record

An agent of record provides numerous benefits, including the following:

  • Expertise. An AOR provides insight and recommends insurance coverage, benefits, and policies based on a company's unique needs and employees. It represents a business in all insurance-related matters and handles any issues, claims, or disputes. 
  • Time and cost savings. An AOR uses its expertise to determine the most cost-effective coverage and employee benefits to save companies time on administrative tasks related to insurance. This allows companies to focus more on business operations and growth.
  • Representation. An AOR deals directly with the insurance company, so the company does not need to. An AOR represents a business and advocates on its behalf to manage negotiations, claims, or disputes to ensure the company receives a fair outcome.
  • Compliance. An AOR provides companies with peace of mind that their insurance coverage complies with local regulations. An AOR manages insurance coverage with the business’s and employees’ best interests.

Cons of working with an agent of record

While there are positive outcomes to working with an agent of record, there are also some challenges, including the following:

  • Limited options. Working with an AOR may limit insurance provider options as they often only work with specific insurance companies. An AOR partner may inhibit a company’s ability to choose competitive prices on the market. 
  • Higher costs. Companies working with an AOR may have to pay more for insurance coverage due to limited offerings and may experience additional fees from the AOR. If a company terminates an agreement in the middle of a policy term, the AOR may charge fees for the missed payments from the insurance company.
  • Limited coverage. An AOR may recommend an insurance policy that provides inadequate coverage and doesn’t fully serve a company’s specific needs.
  • Overdependence. A business relying on an AOR to oversee all insurance-related decisions might not have the best understanding of its own insurance needs, which may lead to oversights and uninformed decisions.  

What is an agent of record letter?

An agent of record letter is a document that officially appoints an insurance agent to represent a company. An AOR letter is required for a business to terminate and replace an existing AOR with a new agent of record.

The AOR letter gives the agent of record authority to act on behalf of the business and serve as a liaison when negotiating with insurance companies. The letter allows the agent of record to handle all communication with insurance companies, negotiate premiums and coverage, administer benefits, and manage policy details.

An AOR typically includes the company’s name, the carrier’s name, the policy number, and the effective policy date. 

How does the AOR process work?

The AOR process begins once a company decides to work with a specific agent. The new agent of record sends an AOR letter for the company to review and sign. The company returns the letter to the agent of record, who then sends the signed AOR letter to the insurance provider.

The new insurance policy usually transfers within five to 10 days. The new AOR relationship officially begins once the insurance carrier accepts the letter. This acceptance also automatically terminates the old AOR relationship if the company replaces an existing AOR with a new agent of record.

If a company changes its mind about the AOR, it must sign a rescinding letter within the five-to-10-day period to render the original signed AOR null and void. After 10 days, the company must sign a new AOR letter with another agent to terminate the previous AOR.

Companies must thoroughly read the AOR letter before signing to ensure they enter an agreement that suits their unique needs.

When might you need to terminate an AOR letter?

A business may terminate an AOR letter and change its AOR for numerous reasons, including the following:

  • The current AOR does not meet expectations or mishandled a task
  • The company is unhappy with the AOR’s services or communication
  • The company seeks an AOR with more expertise in a particular industry 
  • The company wants an AOR with access to a specific market

Velocity Global helps you offer comprehensive benefits to talent in 185+ countries

As an industry-leading EOR, Velocity Global not only helps you quickly and compliantly hire talent in 185+ countries but also manages and administers competitive, market-tailored benefits packages to your employees on your behalf.

Our expertise in local benefits and global employee benefits ensures that no matter their location, your employees have the opportunity to access the support they need to thrive.

Contact us to learn how Velocity Global helps you compliantly hire, pay, and support a global workforce with competitive employee benefits.

Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. © 2024 Velocity Global, LLC. All rights reserved.

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