What is an agent of record (AOR)?

An agent of record (AOR) is an entity (such as an individual or company) that acts on behalf of an insured party—a profession that accounted for about 568,800 jobs in 2024. 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.

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.

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What does an agent of record do?

An agent of record acts as the primary contact between your company and your insurance carriers. Their main job is to simplify the complexities of managing insurance policies. This frees up your team to focus on core business goals instead of administrative tasks.

Key responsibilities of an AOR typically include:

• Policy management: Handling renewals, negotiating terms and pricing, and managing policy documents.

• Expert advice: Providing guidance on the best coverage options based on your company's needs and industry.

• Claims support: Assisting with the claims process to ensure issues are resolved efficiently.

• Carrier communication: Serving as the official intermediary for all communications with the insurance provider.

Why do companies hire AORs?

So, why do companies actually hire AORs? It comes down to gaining expertise without the overhead.

Instead of dedicating internal resources to navigate the insurance landscape, businesses can offload this responsibility to a specialist, which is why insurance agencies and brokerages employ 62% of all agents. This is especially helpful for small to mid-sized companies that may not have a dedicated benefits or risk management team.

The main advantages include:

• Time savings: Less administrative work for your team

• Risk reduction: Lower chance of compliance errors

• Better rates: Access to industry relationships and negotiating power

What are the pros and cons of using an AOR?

Like any partnership, working with an AOR has both advantages and potential drawbacks. Understanding them helps you make an informed decision.

Pros:

• Access to expertise: You benefit from specialized knowledge of the insurance market and compliance requirements.

• Time savings: Your team is freed from handling time-consuming negotiations and paperwork.

• Centralized point of contact: Simplifies communication by having a single intermediary for all insurance matters.

Cons:

• Less direct control: You give up direct communication with your insurance carrier, which some companies prefer.

• Potential for miscommunication: Important details can get lost in translation between your company, the AOR, and the insurer.

• Service level dependency: The quality of your insurance management is entirely dependent on the AOR's performance.

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 when you want to switch from one agent to another. The process is pretty straightforward—when you sign a new AOR letter, it automatically replaces and terminates the previous one.

Here's how the agent of record change process works:

• 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, especially since the federal government requires businesses with employees to carry workers' compensation, unemployment, and disability insurance.

Industries with specialized requirements include:

• Healthcare: Complex regulatory compliance and malpractice coverage

• Finance: Errors and omissions insurance, cyber liability

• Construction: Workers' compensation, contractor coverage

Seeking out an AOR with experience in your industry ensures your company has the right coverage.

How to choose an AOR

So, how do you actually choose the right AOR? It's more than just picking the first agent you find.

Here are the key factors to evaluate before signing an agreement:

• Industry experience: Do they have a proven track record in your specific industry and understand its unique risks?

• Service and support: What level of support do they offer? Will you have a dedicated contact person?

• Transparency: Are their fees and commission structures clear and easy to understand?

• Technology and tools: Do they use modern tools to streamline processes and provide you with visibility?

Taking the time to vet your AOR upfront can save you from the hassle of switching providers down the line.

AOR vs. EOR: What's the difference?

It's easy to confuse an Agent of Record (AOR) with an Employer of Record (EOR), but they serve very different functions. An AOR's role is limited to managing your insurance policies.

An EOR, on the other hand, provides a much more comprehensive service for companies hiring globally. As the legal employer, an EOR like Oyster handles all aspects of employment, including:

• Compliant local contracts

• Payroll and tax withholding

• Statutory benefits administration

• HR compliance and risk management

While an AOR is a tactical partner for insurance, an EOR is a strategic partner for your entire global employment infrastructure. If your goal is to hire and support employees in other countries without setting up your own legal entities, an EOR is the solution you need.

Considerations before signing an AOR letter

While you can always switch agents later, being proactive upfront saves you headaches down the road. The key is carefully reading through the agent of record form before signing.

Each AOR letter has specific details about the agent and their agreement. Consider having a legal expert review it, especially if you're unfamiliar with insurance contracts.

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.

Here's something that catches many companies off guard—service fees. Because agents are compensated for their work—with the median annual wage being $60,370 in May 2024—AORs may charge termination fees to recoup lost commissions if you switch mid-policy term.

Why? Because they lose out on their full annual commission. Before making any changes:

• Review your contract: Look for termination fee clauses

• Calculate costs: Compare fees against potential savings

• Time it right: Consider waiting until policy renewal

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.

Simplify global employment with Oyster

An Agent of Record can be a valuable partner for managing insurance, but for companies building a distributed team, the challenges go far beyond a single policy. You need a solution that handles the full complexity of global employment—from compliant hiring and payroll to locally relevant benefits.

Oyster's global employment platform was built for this. We act as your Employer of Record in over 180 countries, enabling you to hire, pay, and care for your team anywhere, without the burden of setting up local entities. If you're ready to build a global team the right way, start hiring globally with a partner that simplifies it all. Book a demo to learn more.

FAQs

What does agent of record mean in insurance?

In insurance, an agent of record is a broker or agency authorized by a policyholder to represent them in all dealings with an insurance carrier. They can negotiate terms, manage the policy, and handle claims on the policyholder's behalf.

What does AOR mean in healthcare?

In healthcare, an AOR typically manages a company's group health insurance plan. They help the company select plans, handle employee enrollment, and serve as the intermediary with the health insurance provider for any administrative issues or questions.

What's the difference between an agency of record and agent of record?

The terms are often used interchangeably, though "agent of record" typically refers to an individual broker while "agency of record" refers to the entire firm. Both have the same legal authority to represent you with insurance carriers.