Creating a benefits package is no easy task. At times, the process of creating a comprehensive benefits package can mimic that of creating a business—let’s say, starting a restaurant. You want to make sure your menu is able to attract diners who would typically eat that kind of food. But you also want to ensure that it’s interesting and attractive enough to lure in new diners. Not only that, but you want to make sure you’re offering menu items that other restaurants aren’t in order to attract even more diners to your restaurant. And, of course, you want the food to be affordable for both the people who eat at your restaurant and yourself. Of course, anyone who’s owned and operated a restaurant could probably tell you that all of those things are significantly easier said than done. It’s the same thing with a benefits package: creating one that not only covers the needs of your current employees but also helps to attract new ones, all at an affordable cost, is a stressful proposition indeed.
At Payday HCM, we understand the stress that comes with creating the perfect benefits package. Our benefits agency is constantly receiving questions from current and prospective clients alike, wondering whether or not this acrobatic feat can actually be pulled off. Well, we’re here to tell you it can, but there needs to be a number of crucial pieces in place in order for the process to go over as smoothly as possible. One of those pieces is an agent of record (AOR). But what is an agent of record?
Well, in this article, we’ll be going over what an agent of record is and how understanding what an AOR is can help the benefits package creation process go smoothly. We’ll start by going over what an agent of record is and how they fit into the benefits process before diving more deeply into how you can assign someone as an AOR and the things to look out for when deciding to assign an AOR. By the end of this article, you’ll have the knowledge you need to start your business on the benefits package creation process with confidence.
In this article, you will learn:
- What Does Agent of Record (AOR) Mean?
- How Do You Assign an Agent of Record (AOR)?
- Things to Keep in Mind When Hiring an Agent of Record (AOR)
What Does Agent of Record (AOR) Mean?
To start, we’ll go over what an agent of record is and how AORs actually fit into the benefits administration process.
Employee Benefits Administration
On the surface, employee benefits administration is relatively simple. The term “employee benefits administration” refers to the process of creating, managing, and updating a business’s employee benefits package. Benefits administration is typically something that is performed by a company’s HR department, whether that be in-house or outsourced.
Now, the actual benefits administration process is much more complicated than it sounds. Finding group health insurance plans, communicating with carriers, and finding plans that fit with the size, location, and budget of your organization—these are all things that come with benefits administration. Businesses that choose to outsource this process work with an agent of record to help in the creation and maintenance of an employee benefits package.
What Does an Agent of Record (AOR) Do?
An agent of record, then, functions as a sort of middleman between the individual or organization looking for or that currently holds an insurance policy and the insurance company. The AOR acts on behalf of the policyholders and works with the insurance company on things like renewals, claim submissions, and plan modifications.
The agent of record is essentially your insurance manager, taking care of any insurance-related tasks on your behalf and for your business. The AOR can find different coverage options that are best suited for your needs, advise you and your company on which coverage options might be best for you, and generally manage your insurance policies without you having to worry about it.
How Do You Assign an Agent of Record (AOR)?
Now that we understand a bit more about what an agent of record is and what they do, we’ll dive deeper into the process of assigning an AOR.
Agent of Record (AOR) Letter
The process of assigning an agent of record, luckily, is not too complicated. An AOR is simply the designated agent that is negotiating with the insurance carriers on your behalf. Regardless, you’ll need an agent of record letter in order for the AOR to actually formally (and legally) be considered an AOR.
An AOR letter is a document that allows a benefits agent to act as an agent of record. An insurance company cannot interact with any other party unless they are an authorized AOR. The AOR letter lets the insurance company know that you, as an authorized representative of your company, authorize the insurance company to work with the AOR for plan management.
What’s in an Agent of Record (AOR) Letter?
While an AOR letter is required in order for a benefits agent to work with an insurance carrier on behalf of your business, there isn’t a designated AOR letter document that benefits agencies use in order to become authorized as an AOR. Typically, the AOR letter is developed by the agent or agency and contains information on how the AOR relationship will work between the agent and the company.
The AOR letter process starts with receiving the AOR letter from the benefits agent. The letter should contain your company name, insurance carrier, policy number and effective date, and any other relevant policy details. You would then review and sign the AOR letter, then return it to the agent. The agent would then send the AOR letter to the insurance company. Typically, the agent will be confirmed as an AOR in about ten days.
Things to Keep in Mind When Hiring an Agent of Record (AOR)
Now that we have an understanding of what an agent of record is and what the AOR letter process looks like, we can look at some things to keep in mind when hiring an AOR.
Research and Consideration
As with many other decisions regarding your business, the most important thing to do when looking at hiring an AOR is thorough research. While every AOR performs the same function, not every AOR will perform it the same way (and for the same price). Take your time and exhaust all your options before narrowing it down to one.
Companies choose to hire AORs for a variety of reasons, including policy management, risk assessment, claims management and advocacy, compliance assistance, and professional guidance. You’ll want to decide beforehand whether these kinds of services are what your organization needs.
While there aren’t any specific legal requirements for what should be included in an AOR letter, there are some qualifications that an agent will need in order to be an AOR for your business. Mainly, a benefits agent will need to be licensed in the state where your business is operating and appointed by the carrier in order for them to serve as your AOR.
How to Terminate an AOR Agreement
If you’re considering hiring an AOR, part of the process includes terminating your relationship with your current AOR. For those hiring an AOR for the first time, this isn’t as relevant, but it’s still important to understand how to terminate an agreement if you do find yourself in a situation where the AOR relationship is not working out.
The five to ten days that it takes for an AOR letter to be processed is typically the best time to terminate an AOR agreement after it’s been signed, as you’ll be able to rescind the letter. If the agreement is already in place, you’ll need to find a new AOR and sign an AOR letter with them. This could result in service fees from the old AOR, however, as you did not complete your contract with them.
Working Smarter With an Agent of Record (AOR)
It’s hard to please everyone, but for most businesses, this is the ultimate goal—this includes not only your customers, but your employees as well. Accomplishing this often means relying on those around you, but bad partnerships can make this goal unattainable. When it comes to creating an employee benefits package, a good agent of record can help you make the choices that are best for your business, helping your employees, which, in turn, helps your business overall. And, with the information provided here in this article, you’ll have the knowledge you need to get started on your AOR search.
Creating a comprehensive benefits package that not only fits the needs of your current employees but also helps to attract new talent can be a tricky balancing act. Not only that, but you also want to ensure your company’s benefits package is both comprehensive and cost-effective. An agent of record is only one piece of the puzzle when it comes to creating the perfect benefits package. You want to ensure the benefits agency that you’re working with understands your business and the kinds of things that you want in a benefits package. Check out our article on the five features to look for in a benefits agency to learn more about finding the best benefits partner.
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