What is an agent of record (AOR)?

Agent of record

An agent of record (AOR) is an entity (such as an individual or company) that acts on behalf of an insured party. The AOR has the legal authority to manage insurance policies on the other party’s behalf. Many companies enlist the help of AORs to oversee health insurance matters. Leveraging this service can save companies time and effort, enabling them to dedicate more resources to the business’s core strategy and objectives. AORs can also assist with decision-making for employee benefits packages.

Wondering how Oyster fits into your big picture?
Book a customized demo to see what your day-to-day could look like with our global employment platform.

Since AORs can act as the company’s authorized representative, the company doesn’t need to interact with the insurance company. With that in mind, only an AOR can serve as this intermediary party—insurance companies cannot interact with any other entities that are not authorized AORs.

What is an agent of record letter?

An agent of record letter is a document that designates which agent a business owner wishes to represent their company. The letter gives the agent the authority to act on behalf of the company when negotiating plan details with insurance companies. For example, the letter enables the AOR to act as an intermediary party when negotiating plan costs, managing quotes, communicating with candidates for insurance companies, and overseeing policy details.

AOR letters are required for businesses that wish to replace an existing AOR with a new one. When an AOR letter is signed, it automatically replaces and terminates the previous one. Here’s a glimpse into what the agent of record change process entails:

  • Step 1: You decide on a new AOR to work with, who then sends you an AOR letter with details about your chosen policy.
  • Step 2: You review the letter, then sign and date it before returning it to the agent.
  • Step 3: Your new agent sends the signed agent of record change form to the insurance company.
  • Step 4: The policies are then transferred, typically within ten days.

Why might you need to terminate an AOR agreement?

You might need to switch to a new AOR and terminate your agreement with your existing agent for several reasons. Here are some of the most common motivators:

  • You’re seeking an agency with more knowledge and experience working in your industry
  • The current agency is no longer meeting your expectations
  • Your current agent failed to anticipate an issue or handled a task improperly
  • You’re seeking a specific insurance market that your current agent can’t access right now

Often, companies seek new agents because they’re not fully satisfied with the services they’ve provided or because communication challenges have affected their overall quality of service.

Sometimes you might also need a new AOR if your current agent isn’t well versed in your industry’s unique needs. For example, businesses in healthcare or finance might have specialized insurance requirements which call for industry expertise. Seeking out an AOR with experience in your industry will ensure that your company has the coverage it needs to be well protected.

Considerations before signing an AOR letter

While you can always find a new agent if needed, being proactive in your search and carefully reading through the agent of record form before signing it is the best way to prevent issues later. By selecting the right agent from the start, you can also save time and hassle that would otherwise be spent looking for another one down the road. Each AOR letter has specific details about the unique agent and their agreement, so be sure to read the document closely or even have a legal expert look it over for you.

In addition, there are some other things to consider before signing a new agreement. This letter represents the official hiring of your new agent of record, meaning your old agent will be fired immediately. It’s important to avoid signing the document prematurely, so you can complete any final business with your existing agent.

Another factor to consider is the possibility of incurring service fees. Since AORs don’t get paid for the entire year if you terminate an agreement in the middle of a policy term, they may charge fees to compensate for the missed payments from the insurance company. Be sure to read through your existing contract for details about fees.

In some cases, it may be possible to rescind an agreement with an AOR. There’s usually a 5-10 day period in which you can sign a rescinding agent of record letter that will void the original letter. If you wish to rescind the agreement after this grace period, you must sign a new AOR letter with a different agent and incur any applicable fees.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.