This post is part of a series sponsored by Old Republic Security.
As an independent insurance agent, you probably had an awkward moment or two with clients. Those are good learning experiences. In this article, an experienced guarantor bond manager shares his own awkward conversations with clients and what they actually meant. You will find them instructive when you start creating specific business books for your agency.
As a bond manager, we are always looking for ways to help our agents, contractors and project owners better understand bail. It can be a pretty stylish thing and not everyone who has a hand in the process is familiar with the bond. But that doesn’t mean we still don’t get the moment we deserve sometimes! It just binds how important education is in the world of bonding.
Here are my top five believable conversations and their “translations”. Maybe you even have your own list.
- “We don’t need bonds. All we need is a pre-qualification letter. Translation: Why buy cows when you can get free milk?
In this case, the project owner seeks bail to pre-qualify the contractor without securing a bond. Owners have the idea that if a security is looking at an account, it must be secured. However, the pre-qualification letter does not provide underwriting of the same depth required for a bid or performance and payment bond. The basis of this letter can be as simple as a credit report. There is no obligation to contract with the bond. And there is no protection by default.
- “The owner only wants a bond for a certain percentage of the contract. Translation: The owner wants protection but does not want to pay for coverage.
Our follow-up question is usually, “Which part of the project are you asking us to bind (which we are happy to do, if you break it in your contract)? As a practical matter, the percentage bond of a project does not make sense. There are guarantees for all aspects of the contract.” And that’s how we determine the underwriting and price of the bond.
- “Account here. Give me your best suggestion. Translation: This account is going to multiple bails, and the best company can “win”.
Win from any point of view? Capacity? Relationships? Skills? Did anyone ask the client what the win meant to them? Did they get a chance to meet an underwriter and feel comfortable? Here are a few things to keep in mind:
- Rates are almost always passed on to the employer as part of the cost of the job.
- The rate difference rarely determines whether a contractor is a lesser bidder.
- If an account is taken based on the rate, it will probably be lost in the rate. Competition in any industry is healthy, but contract assurance should not be considered a product.
- “Can you quote this bond?“Translation: The agent may not be familiar with the surety deposit process.
We usually hear it because of a lack of skills, not because of ratings. Sure companies have different appetites and business abilities, and experienced bond issuers know which company will be the best match for which contractor. Establishing a bond credit (and finally agreeing on a rate) is a process that depends on character and relationship as much as it depends on financial strength. The value of a guaranteed-dedicated producer is what their underwriting questions can be expected and work with certainty to get the best overall fit.
- “I just need this one fall. Translation: I know this contractor will not qualify for a bond, but I will be able to tell them that I have tested with some certainty..
Sometimes it is helpful to explain from a bail why a bond cannot be written. The steps they can take to get guaranteed credit are even more rewarding. In some cases, we can be creative and find a way to write an account, or at least recommend a producer or marketer who can do business in difficult places.
Old Republic Security enjoys working efficiently at all levels. The more we can educate everyone about our industry, the more value we can generate. Let’s listen to your sad moments, but let’s do what we can to end those conversations.
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