Not an “ugly” 4-letter word

This article is part of a series sponsored by the guarantor of the Old Republic.

Secured bonds have gained an unfortunate reputation of being “ugly” or “discomfortable” for independent insurance agents for a number of reasons.

Unlike traditional insurance contracts, this is a bipartisan agreement between an insurance provider and a policy holder, and the secured bond involves three parties: the principal, the creditor and the guarantor. The principal guarantees that it assumes the obligation to pay or perform the obligation to the debtor. If the principal breaches the contract, the guarantor will make good liability for the debtor’s obligations (and then seek repayment from the principal).

In many ways, bonds are more like banks extending to clients’ financial lines of credit than traditional insurance policies. Therefore, some agents see them as too complicated.

But with the right guarantee partner, nothing is possible. In the Old Republic’s Guarantors, we are there to help agents complete every step of the guaranteed transaction, from bond selection to issuance, and in the process of guaranteed education, communication and handheld.

The beauty of the bond

If independent agents fail to see the beauty of secured bonds, they may miss out on major business opportunities.

Agents that cannot provide bonds risk losing their customers’ competitors. Meanwhile, those trapped in assurance can provide more value-added services to current and prospects, which can earn huge rewards in terms of customer appeal, satisfaction and retention.

There are great opportunities for growth. There are thousands of secured bonds that help contractors ensure compliance with their obligations and compliance with legal requirements in a wide range of careers.

For some agents, the sheer scope of the bond market is Catch-22, as there are almost too many options to consider. However, working with experts in this field can transform a potential overwhelming pool of products into targeted business opportunities.

It is also worth remembering that many secured bonds are easy to underwrite. Agents can often meet the needs of their clients on the same day and click a few buttons through the immediate issuance of bonds.

The bond itself is also very sticky. They usually last during a contract or project, or the coverage is continuous until cancelled. This is unlike a traditional insurance policy, which may be shopping every year.

Finally, beauty can be seen in the Surety Bond committee, which in the soft market ranges from 20% to 35% or higher. This is a paid rate compared to 10% to 15% of agents who typically earn 10% to 15% of their commission agents on property and casualty insurance premiums.

Partnership is key

There is a lot to learn when it comes to providing and issuing secured bonds, but the positives of independent agents far outweigh any challenges associated with breaking into the bond business.

Agents who think “bond” is an ugly four-letter word may lack the support needed to secure a successful guarantee. But with dedicated guarantor partners like Old Republic Surety, they will soon see the beauty of the bond.

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