Most insurance agents are independent entrepreneurs, self-motivated and eager to achieve success in their chosen profession. That independent streak is the same characteristic that can create blind spots when planning for and delivering a broad menu of insurance products. A surety bond is a unique, niche product. Most property casualty producer licensing examinations contain at best, two questions about surety bonds, which is an indication of how important bond underwriting knowledge appears to be to regulators and perhaps the insurance sector as a whole. Michael Curtis defined the importance of “specialization” as an insurance professional. ” . . . the best insurance agents focus primarily on one product. It allows you to seek out niche opportunities and become an expert in one type of insurance.” Why should an insurance agent use a surety bond broker? There are many reasons.
Subject matter knowledge is a biggie. There are by my estimate over eighty thousand different commercial surety bond forms in current use in the United States. Surety bonds are not really insurance. They are guarantees of specific statutory or contractual promises. The most important consideration in the underwriting surety is to be able to read and clearly understand the nature of the obligation. That may be as simple as reading the surety bond form, but usually, . . . it is not. Underlying statutes and local codes generally obligate a bond principal to a myriad of compliance provisions. Understanding the true scope of an obligation can be time-consuming and if the agent is not fluent in legal terms, complicated. Even experienced surety bond underwriters are not immune. Take for instance a license bond for a blasting contractor. A commercial surety unit may respond to a submission with a declination based on the “danger of property damage, bodily injury and environmental exposures.” As a certified blaster, a review of the obligation enhanced by industry-specific knowledge and assurance that the principal carriers the appropriate liability coverage makes this obligation an absolute and easy “yes”. A typical insurance producer prelicensing education manual or course will generally dedicate two or three pages to commecial surety bonds. Unless a producer wants to specialize in surety, he or she is better off using a surety bond broker.
Market access is another strong selling point. Many insurance carriers require a producer to offer a certain annual volume of production in order to obtain and maintain an appointment. This is a way of avoiding agencies that may submit bond applications infrequently. Agents with general insurance practices that may encounter a “one-off” bond now and then are simply more trouble than they are worth. The aggravation at the carrier level is exacerbated by producers’ lack of knowledge on how to properly prepare surety bond submissions, complete and execute indemnity agreements correctly and properly monitor bond principals. Bottom line, lack of volume and surety expertise equals limited market access. A producer should use a surety bond broker because we generally have access to carriers that you do not. We know their appetites and we know how to build out an adequate submission that is likely to be approved.
The most notable justification for an insurance agent using a surety bond broker is also the most important, . . . service. With few exceptions, an insurance producer that submits business to a large insurance entity is either directed to an “e-surety’ish” portal, given a fax number or an email and encouraged (sometimes strongly) to use them exclusively. Personal conversations with underwriters at the carrier level are not nearly as common as they could or should be. A small independent insurance agency may feel that “going direct” with a surety company rather than working with an intermediary will result in larger commissions. That is not necessarily true as most volume surety bond specialty brokers can remunerate a producer just like the carrier. So, all other things being equal, why should an insurance agent use a surety bond broker EVEN if commissions may slightly vary? Simply because surety bond brokers are just like you. We are dedicated to doing whatever is possible to be successful in what we too have chosen as a profession. If we wish to reach our goals, we must help others reach theirs. A surety bond broker cares at all for others supports a producer’s efforts to grow his or her book of business, to teach him or her what makes a good bond submission, to help the producer grow in knowledge and expertise so that surety becomes a profitable portion of the agency’s activity. Those producers that do NOT wish to develop surety expertise will generally find a “turn-key” solution with a surety bond broker who will politely (and patiently) work through submissions with the agent and put some money in the his or her pocket.