Ask a Broker: Is My Health Insurance Broker Scamming Me?

Watch Out for Broker Practices That Cross the Line

Hi Teri,

We are looking into changing health insurance brokers. The new broker is telling us that in order it to quote us for health insurance, we need to sign a letter that says he is our new broker. Does this sound right?

Thanks,
Mikayla
-Local Santa Rosa Business Owner 

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Hi Mikayla,

You are correct to suspect that something isn't right here. Some brokers, unfortunately, engage in several varieties of questionable practices. Asking you to sign this letter is just one of them.

​You are correct to suspect that something isn't right here. Some brokers, unfortunately, engage in several varieties of questionable practices. Asking you to sign this letter is just one of them.
 
You Do Not Have to Change Brokers to Get a Quote
 
By signing a Broker of Record letter such as this one, you will actually turn your business over to this prospective broker. This means you are also officially taking your business from your current broker. This means the new broker will begin receiving the commissions instead of the old broker, who will also become unable to handle anything for you, including your current insurance contract.
 
So, do you really need to fire your current broker and hire another one just to get a quote? No. Most often, the broker just needs to be able to answer questions about the prospective client and provide an accurate employee count. Asking for a BOR letter just to request a quote is considered a bad broker practice. 

Insurance carriers may strive to protect businesses by instituting a waiting period before they will honor the new BOR. Some may also let your old broker know about this development so he or she can discuss this issue and make sure you truly want to switch. However, you cannot always count on the insurer picking up on this bad practice and protecting you, so you are right to watch out for your interests. 

Other Bad Practices to Watch Out For
 
A broker who is willing to resort to unethical ways of getting your business may use more than one shady technique to achieve this. One of them is misrepresenting facts. Some brokers will tell you untruths about insurance plans and terms, with the goal of making the plan they want to push sound better. It can be hard for a business owner to untangle the facts. However, if you catch a prospective broker bending the truth or being unethical in one instance, you no longer have grounds to trust him or her in other instances.
 
Rebating
 
Some brokers make tempting but illegal offers to prospective clients they want to attract. Whether a broker is offering to give you part of his or her commissions, or to provide other types of goods in exchange for signing up, you should be aware that this is not legally permissible. Generally, a broker has the right to offer you one thing: his or her professional services. Anything else can potentially fall into the category of illegal rebates.
 
What You Can Do
 
While some types of conduct – such as pressing for a premature BOR letter – may be merely bad practice, others may actually be illegal. You can report activities such as defamation or rebating to the California Department of Insurance.
 
Getting a Reliable Broker
 
An honest broker you can rely on is your key to getting the insurance product you need. For more information on health insurance services for your business, contact Sackett Insurance Services at 707-823-3698. You can also like us on Facebook, find us on LinkedIn and subscribe to our blog to get helpful updates.