![](https://www.csobeech.com/images/thumbsup.gif)
BOR Letter Explained
(Contributed by Bonanza owner John R.)
The
Broker of Record (BOR) letter is one of the most powerful and abused
documents in the insurance industry. Unfortunately, many less than
scrupulous brokers convince lay insurance buyers to sign this document
without explaining exactly what it accomplishes.
Your
insurance policy is due for renewal and you have decided to seek a
competing proposal from another insurance broker. You provide this
broker with all the pertinent underwriting information and then sit back
and wait to receive his or her quote at a later date. Instead, the
competing broker calls you back and complains they are unable to obtain
any quotes because your current broker has already contacted all
available insurance markets and therefore, he/she is “blocked” from
obtaining any quotes. This seems unfair, even anti-competitive.
The
competing broker then suggests a way to “fix it.” Simply sign a
BOR letter appointing him or her as broker, which will allow them access
to the insurance market to obtain a quote. Be careful and give
thoughtful evaluation before signing! This is a very powerful
document. As soon as you sign this letter, the competing broker
will forward it to the insurance companies who were “blocked,” informing
them you have fired your current broker and hired the competing broker
to represent you in the market. The insurance company will then notify
your current broker by sending them a copy of the signed BOR letter
confirming same. The insurer will then give your current broker five
days to obtain a rescinding BOR letter. Your current broker is now going
to contact you and ask why they have been fired. This can be an
uncomfortable call to receive if you do not know it’s coming. A good
broker seeking a BOR letter will have carefully explained exactly what
will happen if you sign the letter so there are no surprises.
What exactly is a Broker of Record letter and why is it necessary?
Insurance
companies rely on insurance brokers to bring accounts to them for
evaluation. There are a small number of aviation insurance companies,
each with limited staff, and they do not want to tie up their
underwriters by quoting the same risk to numerous different brokers.
Therefore, each will recognize only one broker on any given risk on a
first-come, first-served basis. The first broker who submits a risk to
an aviation insurance underwriter is the official "broker (or agent) of
record" and the insurance carrier will assume this person was the
customer’s first choice. The choice of broker belongs entirely to you,
the customer, so the broker can be later changed if that is the wish of
the customer. Enter the Broker of Record Letter. It is a serious
document that accomplishes the following:
- Terminates
the relationship between you and the current broker and suspends the
current broker's ability to negotiate on your behalf with the insurance
company.
- Affirms
the appointment of a new broker, giving that broker the sole ability to
negotiate with the insurance company for you, and grants access to any
underwriting information or proposals that are currently "on the table."
(Without a significant change in the basic underwriting information, if
the insurance company has already made a firm commitment to the first
broker to either decline or provide a quote, the new broker "inherits"
that decision – whether it is a declination or a specific premium
proposal.)
- Provides
a relief mechanism or transition period from one broker to another,
expressed in number of days, to allow full disclosure of the letter to
all parties involved, thereby granting the former broker the opportunity
to review the implications of the letter with you and to confirm your
desire to change brokers.
Reasons you might decide to sign a broker of record letter include:
- You are simply unhappy with the service or performance of your current agent / broker.
- The
competing broker convinces you they bring more benefits to the table
including possible expertise in areas such as experience in your class
of business, claims, or loss control unique to your risk.
Be
certain you understand the ramifications of this document. Have your
broker (either your current broker or the candidate broker) explain its
intent before you sign it. You are generally best served by
selecting, up front, one competent aviation insurance broker who has
access to all the markets and will consult with you on the resulting
proposals.
![](images/thumbupguy.gif)
|