While surety is technically an insurance product, most insurance agents know it’s significantly different than traditional P&C coverages.
Surety experts know what to look for in a client’s submission to give them the best possible chance of qualifying for the bond they need.
In fact, I would argue that surety is more like banking than insurance.
However, many insurance agents, with only surface level knowledge of bonds, still try to place the business for their clients as a courtesy. Regardless of the reasons — many well-intentioned — this practice is akin to a brain surgeon trying to perform heart surgery.
Knowledge is power
Here are three reasons most insurance agents would benefit from using a surety expert instead of handling bonds themselves:
No. 3: Sometimes, the best offense is a good defense.
Someone said to me once that success in the agency business is really very simple: It comes down to making sure the business from new clients consistently exceeds business from existing clients.
In other words, client retention is key.
One of best ways to retain clients is providing exceptional service in the areas we’re best at, and having a network of outside relationships for all other specialized services. It’s the same reason we so easily give a referral to a lawyer when asked a legal question or a CPA about an accounting question.
Why are bonds any different?
When you do engage a surety expert to help with a client’s bond needs, it not only helps you avoid fumbling through their request yourself and possibly hurting your relationship, it can also turn you into a hero for introducing them to someone who provided a great solution to their problem.
Referring bonds to a surety expert that doesn’t provide other lines of insurance can also serve to protect your client from looking on their own to solve their surety needs.
If a client is left to do their own research, because their bonding need hasn’t been resolved, this creates an opportunity for another insurance agent who does write bonds to target and potentially capture their business.
No. 2: Surety experts will be able to provide your clients more options.
We all know that having the right markets and right relationships matter.
But for some reason, when it comes to surety, the same thought process doesn’t apply for many people.
In fact, because surety is a credit-based product in which character and reputation are huge factors in underwriting, the relationship between the agent and surety company is incredibly important. I’ve had numerous underwriters tell me they passed on a deal because there wasn’t a surety expert involved, but had there been, they may have written it.
Surety experts also know what to look for in a client’s submission to give them the best possible chance of qualifying for the bond they need.
I received a referral a few months ago from an insurance agent who tried unsuccessfully to write a bond for a client. In my conversation with the client, by asking the right questions, I uncovered more available cash. This, along with our relationship with the underwriter, allowed me to get their current surety to change their mind and provide approval.
The agent was relieved. He’d solved the client’s problem, and the client was able to pursue a very lucrative contract.
No. 1: Most insurance agents lose money on surety bonds
One of the most difficult things about making money in the insurance business is measuring the return on commission dollars relative to the time spent.
The most profitable clients are those who are straightforward in an agent’s sphere of experience. As agents step out of their comfort zone, it takes longer to figure things out and ultimately place the business.
This is particularly true of bonds. Even with higher commission for surety bonds compared to other P&C lines, the inefficiencies insurance agents can experience quickly eat away at the profitability.
We have agents come to us on surety bonds they have been working on for weeks, and it takes us just a couple days.
Putting the client first
I was always taught that when you put the client first, you’ll find you have more business than you know what to do with. Insurance agents have a tremendous opportunity to do this and strengthen their client relationships by using a surety expert each time a surety bond is needed.
Dan Huckabay is the president of Commercial Surety Bond Agency (CSBA), one of the largest surety only agencies in California. CSBA works with over 300 construction companies ranging in size from one-man startups to large national firms. To reach this contributor, send email to firstname.lastname@example.org. The opinions expressed here are the author’s own.