Broker Of Record
In insurance, a broker of record is an agent designated by the policyholder to represent and manage a policyholder's insurance policy. In summary, a broker of record letter can accomplish the following: Terminates the relationship between policyholder and broker. Suspends the current broker’s ability to negotiate on the policyholder’s behalf with the insurance company. Makes official the appointment of a new broker, giving that broker the sole authority to negotiate with an insurance company. A broker of record letter should include specific information, including the name of the group plan and the selected broker, the effective date of the broker designation, and terms in which the broker of record designation can be terminated. A broker of record letter can be used to designate a broker of record for the first time or to replace an existing broker of record with a new one. A broker of record letter is a legal document used to set the relationship between then broker, policyholder, and the insurance company.
What Is a Broker of Record?
In insurance, a broker of record is an agent designated by the policyholder to represent and manage a policyholder's insurance policy. A broker of record may receive copies of all communications to the policyholder and may receive all quotes, policies, and notices on behalf of the policyholder.
How a Broker of Record Works
A broker of record can help an individual or company with, for example, handling the health insurance policies of its employees. In return, the broker of record may earn a monthly commission from the health insurance company.
Broker of Record Letter
A broker of record letter is used to legally establish the relationship between broker, policyholder, and insurance company. A broker of record letter can be used to designate a broker of record for the first time or to replace an existing broker of record with a new one. If someone changes their broker of record, for example, a letter will be sent to identify the new broker of record.
A broker of record may also obtain and evaluate insurance quotes, policies, and recommend changes to existing policies.
Insurance companies require broker of record letters to identify whom the policyholder has selected to act on their behalf to communicate with the insurance carrier for negotiating rates, plan options, claim assistance, etc. In return, the broker of record generally receives commissions from the insurance company.
A broker of record letter should include specific information, including the name of the group plan and the selected broker, the effective date of the broker designation, and terms in which the broker of record designation can be terminated. Policyholders can also include specific directives regarding communication with the plan and other agencies/brokers.
Broker of Record Letter vs. Letter of Authorization
A letter of authorization is neither as comprehensive nor as powerful as a broker of record letter. It gives the broker the authority to obtain information on insurance contracts, rates, rating schedules surveys, reserves, retentions, policies, certificates, and other financial data. Such a letter may be written to be very specific, such as naming the insurance company from which the broker may obtain information. However, a letter of authorization usually won't include the authority to negotiate on behalf of a policyholder.
The Bottom Line
In summary, a broker of record letter can accomplish the following:
Related terms:
Account Current
An account current summarizes the performance of an agent's insurance policies and helps to reconcile payments between the agent and the insurer. read more
Broker and Example
A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. read more
Fiduciary
A fiduciary is a person or organization that acts on behalf of a person or persons and is legally bound to act solely in their best interests. read more
Health Insurance
Health insurance is a type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. read more
Insurance Premium
An insurance premium is the amount of money an individual or business pays for an insurance policy. read more
Insurance
Insurance is a contract (policy) in which an insurer indemnifies another against losses from specific contingencies and/or perils. read more
Indication of Interest (IOI)
Indication of Interest (IOI) is an underwriting expression showing a conditional, non-binding interest in buying a security currently in registration. read more
Life Insurance Guide to Policies and Companies
Life insurance is a contract in which an insurer, in exchange for a premium, guarantees payment to an insured’s beneficiaries when the insured dies. read more
Power of Attorney (POA)
Power of attorney (POA) is legal authorization for a designated person to make decisions about another person's property, finances, or medical care. read more