12 May BORs – Are You Duplicating the Mistakes of the Prior Agent?
A number of years ago when teaching an E&O class, the subject of Broker of Records came up. A somewhat new producer for the agency commented that he loves BORs. In fact, his exact comment was, “BORs are easy, I just renew as is. I don’t have to do any work.” Needless to say, this is probably the worst way to handle a BOR.
The major issue with this “lazy way” of handling a BOR is that the account is now with your agency – and if there is a problem, it is now your problem. Let’s take the example of taking over an account via BOR, and the account has property insurance in the amount of $1 million. You renew the account and bump up the property coverage to $1.05 million and you think you’re good to go. You simply assumed the property limit was at the proper level. The problem is that the prior agent did not do a recent valuation and thus the limit was severely outdated. The client suffers a property loss and the co-insurance penalty is severe enough for the client to bring litigation against your agency. Your account – your problem.
Key issues to consider:
- The agency should make every attempt to perform a comprehensive review of each and every file. Ideally, an exposure analysis review should be completed to determine the current exposures. It is also best that new applications be completed (this is often a requirement of the carrier).
- If time does not allow the proper exposure analysis to be done prior to the effective date of coverage, it is suggested that a letter be sent to the client stating that the agency is not responsible for any deficiencies on the present program and will not assume any responsibilities until the agency has had the necessary time to review the program and provide suggestions to be considered. This letter should be signed by the client as acknowledgement.
- Securing a signed broker of record letter prior to the effective date of coverage to renew does not necessarily mean the agency is recognized as the agent of record. Most insurers only recognize the broker of record at the anniversary date of the policy, and only after allowing a certain number of days for the current agency/client to rescind the broker of record. An agency should check with its insurers for specific rules regarding Broker of Record / Agency of Record.
For most agencies, BORs are a common way of attracting new business. Through demonstration of your expertise an ability to identify gaps in the current program, your agency is able to secure a BOR. It is important to understand that the work does not stop there. Every agency should have a written procedure detailing the expectations of how BORs are to be handled. This should play a key role in helping you to avoid duplicating the mistakes of the prior agent.