Insurance agents typically pursue new business by offering lower pricing, better coverage, and higher quality service. Of course, if a business has competitive pricing, solid coverage and good service from its current carrier, it can be difficult for a competing agent to win that fight. An alternative that can often be effective is for the agent to suggest that the insured keep the carrier and switch agents by signing a broker of record (BOR) letter.
A BOR is a simple document in which an insured appoints a new agent to service their existing policies. The ACORD 36 Agent/Broker of Record Change form is the standard template. As consultant Nancy Germond explains, it ends the policyholder’s relationship with the current agent for any listed carriers, ends that agent’s ability to negotiate for them, and appoints a new agent to take over. Why should an agent try to win business this way?
Look at the odds, says Charles Specht of Permission Network Insurance Agency. He argues that an agency will win the business in less than 10% of competitive bid situations. “Winning the signed Broker of Record Letter, then,” he says, “is essentially the trophy that guarantees you a new client at renewal.”
Rob O’Neill of Town & Country Insurance Services agrees that BOR letters are a tool for agents to use, but he cautions against using it for the wrong reasons. “The agent should only take over the account when it is a win-win situation for the policyholder,” he says. For example, a BOR is appropriate where the agent has superior knowledge about particular coverages such as crop, aviation or cyber insurance.
Being upfront with the client about what the BOR does is important, Specht says. “Be very open and transparent with regards to what the signed BOR does or does not do, and that it terminates the business relationship with the old agent.” O’Neill agrees that the agent should explain that the client is “essentially firing their current agent.” He adds that the client should be prepared for the incumbent to call and attempt to retain their business.
Once the BOR is signed, it’s time for the new agent to get to work. O’Neill lays out four actions the new agent should take:
- Inspect the risk to identify exposures, uncontrolled hazards and coverages needed
- Review coverage recommendations with the client and have them sign for all acceptances and rejections
- Complete and submit new applications
- Arrange for regular meetings to ensure that client expectations are being met
There are right and wrong ways to take over accounts this way. Says Specht, “The proper way to secure a signed BOR is to uncover problems the insured is having, present your solutions to those problems, and specifically ask for the BOR in a tactful manner.” The wrong way is to trick the client. He believes that agents who get clients to sign a BOR without fully explaining what it means should have their licenses suspended or revoked.
Coverage problems must be addressed. Germond says, “If an agent or broker wrote your account incorrectly, simply signing a BOR will not rectify insurance coverage errors.” The point, says O’Neill, is to give the client better coverage and service. A better price is fleeting: “If you are only trying to use the broker of record on better pricing, you will probably lose it on pricing down the road.”
O’Neill also warns against relying on the prior agent’s work. “If you take over a policyholder’s account and do not loss control and physically inspect the risk, then you cannot understand the coverages needed. You can be sued down the road if there is a claim for not enough coverage or missing endorsements.”
Using BOR letters can be a great way to get accounts, Specht says, but agents need to be transparent with insureds. “Most insureds have no idea that the BOR letter even exists or that it is an option for them.” Approach it like any other new client, says O’Neill: “Find out why they are willing to sign a BOR letter, ask the client what they are looking for with the new servicing agent, and make sure it is a good fit for both parties involved.”