Key Takeaways
1. An agent of record (AOR) is an individual or entity that is legally authorized to represent a company in selecting and managing an insurance policy on its behalf.
2. The responsibilities of an AOR can include handling policy renewals and changes, submitting claims, negotiating settlements, and acting as a point of contact between the insured and the insurance company.
3. Some of the benefits an AOR can offer a business include expert advice and time and cost savings. However, choosing an AOR may restrict the insurance choices available to a company as well as create an overreliance on its services.
4. An AOR is sometimes referred to as a ‘broker of record’.
When it comes to managing insurance coverage, many companies turn to an Agent of Record (AOR) to streamline the process. Businesses can focus on their core activities by delegating these responsibilities to an AOR while ensuring their insurance needs are met. Additionally, Professional Employer Organizations (PEOs) often utilize an AOR to handle employee benefits tasks and arrange PEO insurance coverage for client companies.
In this article, we will:
- Explore the role of an AOR in greater detail
- Discuss the advantages and disadvantages of choosing an AOR for your business
What is Agent of Record (AOR) ?
Have you ever heard of an Agent of Record (AOR)? It’s a fancy term for a company or individual legally authorized to represent you when buying and managing your insurance policies. Think of them as your personal insurance sidekick, helping you navigate the complex world of coverage options and employee benefits.
So, what exactly does an AOR do? Well, they’ve got a pretty important job. They’ll work with you to evaluate and select the right insurance policies and employee benefits for your company, handle all the paperwork for renewals and changes, submit claims on your behalf, negotiate settlements, and be your go-to person when dealing with the insurance company. They’ve got your back.
Now, you might be wondering how you get an AOR. It’s pretty simple – just put it in writing. You’ll give them a letter of appointment that says they’re authorized to handle your insurance matters. And if you ever want to switch to a new AOR, no problem! Send a new letter to the insurance company, and they’ll start working with your new representative.
One quick note: you might see the term “AOR” used differently, referring to a company that manages independent contractors and handles their payment, regulatory, and tax issues. But for our purposes, we’re talking about AORs in the insurance world.
In the rest of this article, we’ll take a closer look at what AORs do, how they can help your company, and why they’re essential to ensure you have the right insurance coverage and employee benefits in place.
Pros of an Agent of Record
Companies use an AOR for a variety of reasons. Below are some of the pros of choosing such as agent for your business:
Expert Advice on Insurance Needs
An AOR can provide your company with expert advice on its insurance needs, helping it determine the types of coverage it needs based on its unique risks and exposures. This is especially helpful for relatively new areas, such as health insurance for remote workers, where companies are being called to create such packages to hire and retain the best talent. By comparing insurance policies from various providers, an AOR can help you find the most appropriate policy for meeting your business needs at the most competitive price.
Time and cost savings
In addition to arranging the most cost-effective insurance coverage an AOR can save your business time by handling administrative tasks such as policy renewals, changes to coverage, maintaining all insurance records, and ensuring the coverage is up-to-date. When it comes to submitting a claim, an AOR can handle the process on your behalf by gathering all necessary documents and communicating with the insurance company to ensure the claim is handled and processed fairly and efficiently. By delegating such matters to an AOR, your company can focus on more strategic aspects of its business.
Advocacy and Negotiation
As the primary point of contact between your company and your insurer, an AOR can represent your business in all insurance-related dealings. This includes managing all negotiations and advocating on your behalf if any issues, claims, or disputes arise to ensure your company receives a fair outcome.
Convenience in Insurance Management
An AOR makes it easier for your company to manage its insurance coverage and deal with any questions, concerns, or issues that may arise. As your business’s single point of contact, an AOR can arrange the most suitable insurance policy, provide the requisite information in the event of a claim, and successfully handle the claims process on its behalf.
Peace of Mind for Business Owners
Having an AOR oversees all insurance-related matters, such as non-mandatory benefits for employees, can provide peace of mind for your business, knowing that its insurance coverage and that of its employees is compliant and effective and being handled by a professional who has your business’s best interests in mind.
Cons of an Agent of Record
Below are some of the potential drawbacks to hiring an AOR:
Limited Choice of Insurance Providers
If you choose an AOR, you may limit your options in terms of insurance providers, as some only work with specific insurance companies. This not only limits your coverage options but also your ability to choose the most competitive price on the market.
Higher Costs Due to Fees
In addition to potentially paying more for insurance coverage due to a lack of options, your overall insurance costs could be higher due to additional fees charged by some AORs.
Risk of Inadequate Coverage
An AOR may need to fully comprehend the specific needs and risk profile of your business, resulting in them selecting and purchasing an insurance policy that provides inadequate coverage. Periodically reviewing your company’s insurance policies to ensure they continue to serve the needs of your business can help to mitigate this risk.
Overreliance on a Single Provider
Reliance on a single provider to arrange your insurance needs can be problematic if they are no longer available to provide this service or choose to leave. It is also important for a business to understand its own insurance needs and to be proactive in selecting the right insurance provider, as overreliance on an AOR to make all insurance-related decisions can lead to oversights and the inability to make informed decisions about the coverage they need.
Conclusion
Frequently asked questions
An employer of record (EOR) manages the foreign employment relationship on behalf of a company ensuring compliance with local employment laws and regulations, whereas an agent of record (AOR) is responsible for managing insurance coverage and handling claims or issues that may arise on behalf of the EOR’s clients.
