Typically, an underwriter will offer a quote or issue a policy to the first agent who provided whatever he or she considers to be a full submission. Since a full submission constitutes a substantial amount of information about the insured, the carrier assumes the agent is acting as the insured’s designated representative and the agent becomes the agent of record. If later, the insured wants to change agents, they can do so with an Agent of Record letter (AOR).
There are no regulations covering the use of AOR letters. Jurisdictions generally subscribe to the theory that a consumer should be free to do business with whatever party preferred. Whether or not the former agent is notified and provided lead time to get an AOR letter rescinded is considered a matter between carriers and their agents. However, courts have generally held that, absent an agreement to the contrary, a licensed agent earns the commission when he brings about the relationship between carrier and insured. That’s why in most cases, when an AOR letter is accepted mid-term, the new agent must service without commission until the policy renews.
The absence of regulation notwithstanding, it would behoove the industry to adopt standard procedures regarding AOR letters. It would minimize confusion for customers and reduce assertions of funny business by the losing agent.
IIAT suggests that a good AOR letter process include:
- Definition by carrier of what constitutes a complete submission establishing original agent of record.
- Definition by carrier of what constitutes a qualified appointed agent.
- Definition by carrier of what constitutes a qualified representative of insured.
- Written notification from carrier to incumbent agent that an AOR letter has been received.
- 5- to 10-business day wait after notification by the carrier to give incumbent agent an opportunity to obtain rescind letter from insured.
Sample AOR Letter (from insured)
[Insurance Company Name]
Re: AGENT of RECORD LETTER
[Policy Numbers and type of coverage]
[Policy period or policy term]
Please be advised that effective [date] we have appointed The XYZ Agency as our agent of record with regard to insurance and bonding requirements. This letter also constitutes your authority to furnish the representative of The XYZ Agency with all information they may request regarding our insurance contracts, schedules, worksheets, claims history, or other data.
This letter will remain valid until formally rescinded in writing by authorized corporate officer of ABC Company.