Brokers across the state are jockeying to pick up new accounts now that State Compensation Insurance Fund (SCIF) has changed its policy on recognizing Broker of Record (BOR) letters for accounts written directly by the carrier. But with so much business at stake — some 84,000 policies and roughly $440 million in workers’ comp premium — brokers would be wise to study up on State Fund’s rules for BOR letters before missing out on an opportunity.

Beyond making sure that they have a valid State Fund access number, brokers need to make sure that the BOR is completed on the employer’s letterhead or an ACORD Broker of Record form (Form 36) and is signed and dated by the owner, partner or corporate officer. The letter must include the printed name and title of the signer, and in the case of a nonprofit this would be the executive director of the organization.

In any case, the individual signing has to have the authority to contractually bind the employer to a contract, and he or she must be endorsed on State Fund policy records. The broker also needs to make sure the BOR expresses the policyholder’s intention to appoint the broker as its exclusive broker of record, and that its name and the name of the brokerage on the BOR match exactly the names submitted to State Fund as part of the brokerage profile. The BOR letter also has to include the employer’s name and/or policy number. State Fund is not going to make it easy.

 State Fund Not Complying With industry Standards

Unlike a BOR for represented accounts, the standard 10-day period for a countermanding letter will not apply. State Fund says it will not seek a countermanding letter from the employer. “The BOR letter documents the employer’s decision to utilize a broker,” says a State Fund spokeswoman. “The major difference with our direct-to-broker process is in the timing when the broker takes ownership of the account. If a BOR is received 21 days prior to the [Anniversary Rating Date], the conversion is immediate.”

But if the BOR is submitted within 20 calendar days of the Anniversary Rating Date, the policy will be converted to a brokered policy one year later. That means the policy will not be eligible for commission until the next renewal period. And in cases where the renewal date is different from the inception or renewal date, then the inception or renewal date will be used.

Brokers are also under a strict deadline for getting the BOR into State Fund’s hands. Under its policy, the BOR letter has to be in State Fund’s hands within 30 calendar days of the date on the letter. The effective date of the BOR will be the date it is received at one of the designated State Fund offices either by hard copy, fax or email. Letters received on weekends, state holidays or after 5 p.m. will be considered received on the next business day. 

(Filed by Brad Cain in San Francisco)