Broker of Record - Explained
What is a Broker of Record?
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Table of ContentsWhat is a Broker Of Record?What Does a Broker Of Record Do?Broker of Record LettersBroker of Record Letter vs. Letter of AuthorizationAcademic Research on Broker Of Record
What is a Broker Of Record?
A broker of record is a term used in the insurance industry to describe an agent that represents an insured and manages a policy on their behalf. An insured person assigned this agent or broker to represent them and manage the insurance policy. This agent acts as the middle man between the insurance company and policyholder. He is responsible for all communications pertaining to the policy and receives quotes and notices from the insurance company on behalf of the policyholder. Sometimes, a broker of record advises the policyholder of changes that should be effected on a policy.
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What Does a Broker Of Record Do?
A broker of record can represent and manage the insurance policy of an individual policyholder or a company. When a client hires a broker of record, it reduces the cost they might incur in an insurance policy and also saves them from a bad decision they are likely to make. A broker of record can handle employee health insurance for a company or other policies. A broker of record offers services to clients in exchange for a fee or commission, depending on the agreement between the two parties and the type of policy being managed.
Broker of Record Letters
Before a broker of record can begin to represent the interest of a client or manage insurance policies on their behalf, there must be a formal document stating this. This formal agreement must be between the broker of record, the policyholder and the insurance company. A broker of record letter is formal agreement or letter used to legally indicate an agreement and a relationship between broker, policyholder and insurance company. In some cases, a broker of record letter indicates that an existing agent is being replaced with a new agent by the policyholder. Regardless of this situation, a broker of letter record is essential to insurance companies as it helps them identify the agent representing a policyholder. Given the sensitive roles that a broker of record in an insurance policy, this letter is also important. This broker or agent carries out negotiations, makes claims and plans options on behalf of the clients. A broker of record letter contains details of the agent such as name, the date the agent assumes the role and the date it can be terminated if there is a need to. A broker of record letter can be used for any of the following reasons;
- To terminate the relationship between an existing agent and a policyholder.
- To terminate the ability of the broker or agent to make decisions on behalf of a client.
- To appoint a new broker. To grant negotiation rights to a new broker.
Broker of Record Letter vs. Letter of Authorization
A Letter of Authorization is often compared to a broker of record letter, but both are different. The major difference between these two letters is that while a broker of record letter is clear and contains specific instruction on who can represent a policyholder and their roles, the former is not detailed. Also, a broker of record letter allows a broker negotiate on behalf of a client but a letter of authorization does not give the broker the authority to negotiate on behalf of a client. Despite its uncomprehensive nature, a letter of authorization gives the broker authority to obtain information on insurance contracts, rates, policies, among others.