Listen to this post
Post Summary
What are surety bonds, and how do they differ from insurance?
What are common mistakes P&C agents make with surety bonds?
Why is it important to educate clients about surety bonds?
How can P&C agents simplify the bonding process?
How can BOSS Bonds help P&C agents succeed with surety bonds?
5 Common Mistakes P&C Agents Make with Surety Bonds And How to Avoid Them
Surety bonds are a critical component of risk management for many licensed professionals, from contractors to mortgage brokers. As a Property and Casualty (P&C) insurance agent, offering these bonds can enhance your cross-selling opportunities and client relationships.
While surety bonds are in high demand, P&C agents often make mistakes when promoting them. This can lead to confusion, missed opportunities, and even financial loss. Thus, it’s essential to understand the common mishaps P&C agents make and how to avoid them.
In this article, we'll outline five common cross-selling mistakes P&C agents make when offering surety bonds. We’ll also explain how to avoid these mistakes so you can successfully offer surety bonds to your clients.
Mistake #1: Treating Surety Bonds Like Insurance Policies
One of the most frequent mistakes P&C agents make is assuming that surety bonds are just another type of insurance policy. These two risk management tools serve distinct purposes and function in very different ways.
- Insurance policies only involve two parties: the insurer and the insured. Professionals who purchase insurance policies can seek compensation from their insurer for covered losses or damages. In turn, these policies transfer risk from the insured to the insurer.
- Surety bonds, on the other hand, involve the following parties:
-
- Principal – The professional or business purchasing the bond.
- Obligee – The party requiring the bond, such as a government entity or project owner.
- Surety – The company providing the bond.
An obligee can file a claim against a principal if they fail to meet their regulatory or contractual obligations. Once a claim is filed, the surety will investigate and pay out the bond amount if the claim is deemed valid. However, the principal is ultimately financially responsible for reimbursing the surety, who will seek reimbursement shortly after settling their claim.
As you can see, surety bonds don’t reduce risk for the principal in the same way that insurance policies do – they simply guarantee payment to obligees. When P&C agents don’t understand this key difference, they may confuse clients about their bond coverage, claims process, and financial responsibilities.
Read More: The Important Role of Surety Bonds in Professional Licensing
How to Avoid This Mistake
To avoid this mistake, you simply need to brush up on the distinctions between insurance policies and surety bonds. Partnering with an experienced surety provider can assist with this process. Your surety partner can help guide you through the complexities of bond requirements and answer questions as they arise, ensuring you offer the right products to meet your clients' needs.
Mistake #2: Not Educating Clients About Their Obligations
Another common mistake P&C agents make is not clearly explaining their clients' responsibilities. Depending on the type of surety bond they need, these responsibilities may include:
- Adhering to industry regulations.
- Fulfilling the obligee’s contractual obligations.
- Paying their bond premiums on time.
- Cooperating in any bond claim investigations.
- Paying for any claims the surety company pays out on their behalf.
- Renewing their bond before it expires to avoid a lapse in coverage.
Like some P&C agents, many surety bond clients believe that surety bonds protect them as opposed to their obligee. If you don’t educate your clients about their surety bond responsibilities, they could face legal or financial issues down the line, potentially harming their reputation and your relationship with them.
Read More: A Reminder for Agents: Year-End Bond Renewals for Texas Bars, Restaurants and Retailers
How to Avoid This Mistake
When a client purchases a surety bond through you for the first time, make sure to outline their responsibilities and explain how surety bonds work. You can streamline this process by:
- Creating educational materials about surety bonds to share with your clients.
- Directing your clients to your surety bond provider’s educational resources.
- Allowing your clients to consult with your surety provider directly.
By educating your clients in advance, you can avoid confusion later on and establish a strong relationship from the start.
Mistake #3: Choosing the Wrong Surety Partner
Your surety partner plays a vital role in the efficiency and reliability of your bond offerings. However, not all sureties are created equal.
Some come with higher premiums, slower bond approvals, and limited underwriting support. Partnering with these subpar sureties can hinder your ability to provide the highest level of service to your clients.
How to Avoid This Mistake
Selecting the right surety partner can ensure a stellar bonding experience for you and your clients. To find a top-notch partner, just follow these three steps:
- Select a specialized surety agency – Some surety partners focus exclusively on surety bonds, giving them in-depth expertise that general insurance companies lack.
- Carefully review their reputation – Next, it’s important to make sure that your surety partner has excellent ratings and reviews.
- Make sure they offer fast approvals and personalized support – An excellent surety partner should provide a smooth, stress-free bonding process with quick approvals and tailored support.
Boost Your Revenue by Adding Surety Bonds
Don’t miss commission opportunities. Partner with BOSS Bonds to offer surety bonds alongside insurance products and grow client loyalty through enhanced risk solutions.
Mistake #4: Overcomplicating the Surety Bond Process
Many P&C agents unintentionally make the bonding process seem more complicated than it is. For example, they may require excessive documentation, employ multiple forms, or use outdated application methods. Overcomplicating the process can frustrate clients and discourage them from pursuing the bonds they need.
How to Avoid This Mistake
You can simplify the bonding process by partnering with a surety provider that offers online applications. These convenient applications reduce your clients’ manual paperwork and accelerate their bond approvals. Additionally, you should offer clear instructions to guide your clients through the application process so they can quickly secure the coverage they need.
Mistake #5: Failing to Offer Surety Bonds at All
One of the biggest mistakes P&C agents make is not offering surety bonds at all. Some agents avoid surety bonds because they assume that they are too complex or won’t generate significant commissions.
If you work with the right surety partner, both of these assumptions are likely false. Thus, by forgoing this additional revenue stream, you may risk losing clients and commissions to competitors with more comprehensive risk management offerings.
How to Avoid This Mistake
Surety bonds can be a lucrative revenue stream, particularly if you partner with a trusted surety partner. After selecting the right partner, you can optimize your surety strategy by:
- Leveraging surety bonds as an easy cross-sell – Chances are, many of your current and future clients will need surety bonds at some point in their careers. By including them in your portfolio, you can cross-sell these clients, increasing your commissions and client retention.
- Outsourcing the heavy lifting – If you partner with the right surety, you can provide bonds without taking on their administrative burdens. This can free your time up to focus on what you do best – deepening your client relationships and growing your insurance portfolio.
Read More: 6 Types of Bonds Your Contractor Client Might Encounter
Partner with BOSS Bonds and Cross-Sell Surety Bonds With Confidence
In summary, surety bonds can enhance your revenues and strengthen your client relationships. If you’re ready to start cross-selling surety bonds, partnering with BOSS Bonds can make all the difference.
As a surety-only agency, we offer competitive rates, fast approvals, and expert support. Plus, our exclusive SuretyBonds.Market (SBM) portal gives you full visibility into your clients’ bonds, allowing you to track applications, approvals, and commissions with ease.
Ready to expand your risk management offerings? Partner with BOSS Bonds today!
Sources:
MMR. Surety Market: Industry Analysis and Forecast (2024-2030) Trends, Statistics, Dynamics, Segmentation by Bond Type, End User.
https://www.maximizemarketresearch.com/market-report/surety-market/185094/
