When it comes to surety bonds, insurance agents can encounter several hurdles. These can range from problems obtaining bonds, slow service or uncompetitive rates. In order to remedy this, insurance agents have two options. They can outsource their bonding business to another insurance company, with a sub-specialty in surety bonds, or develop a relationship with a surety bond producer.
Although some insurance agencies may have a surety bond department, they may only be sold as a sub-specialty. When working with another insurance company, the insurance business may be lost to the outside insurance company. But this is a risk that is undertaken in order to fulfill the surety bond needs of the client.
The benefits of working with a surety bond producer are numerous. Some are that insurance agents will be able to offer competitive surety bonds to their clients. They will also have access to underwriters, bond approval and issuance. Additional benefits include that the insurance agents are able to provide their clients with a link to a superior bonding experience. This is because they are able to use their relationships with a bonding professionals who has a vast knowledge of the surety markets, relationships in the industry, seasoned experience and access to Internet and electronic bonding tools. Even if the contractor already has a bond, factors may change. A few examples are if a contractor improves their financial strength and presentation. They may also include key factors that may have been not been in consideration during the application process (such as business continuity).
A surety bond producer will be able to give an experienced and seasoned evaluation and improve the financial performance of the bond. The final added benefit is that the surety bond producer only works in the surety bond industry and will not sell insurance products to the client. Instead, the surety bond producer is incentivized usually through a mutual revenue sharing agreement.
Having a relationship with a knowledgeable and reputable surety bond producer is beneficial for all parties:
- The client receives specialized and competitive products from a knowledgeable expert in the field.
- The insurance agent is able to create and maintain a solid and resourceful relationship with the client. This gives the client access to surety bond expertise. But the insurance agent doesn’t have to worry about losing business to another insurance agent.
- The surety bond producer is able to lend his or her expertise and surety products to the client.