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5 Steps New Surety Producers Can Take to Be Successful

Five strategies to prepare your agency to tap into the new opportunities for public construction projects that need to be bonded.
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5 steps new surety producers can take to be successful

The surety market is ripe for producers looking to expand their books of business, particularly after the passage of President Joe Biden’s $1.2 trillion Infrastructure Investment and Jobs Act late last year.

A significant portion of funds allocated under the bipartisan infrastructure deal will go toward rebuilding American roads, bridges, rails, airports and ports, as well as upgrading national power infrastructures and expanding access to clean drinking water.

Whenever there is an influx of infrastructure spending using taxpayer dollars, there is an increase in the need for surety bonds.

In its recent report, “New Infrastructure Law Expected to Boost US Surety Market,” AM Best revised its U.S. surety segment outlook from negative to stable. Best cited the infrastructure package, the strong operating performance of surety writers, and a “strengthening economy and construction industry” as drivers of the change.

For agents to be successful in this complex segment, there’s plenty to learn. The National Association of Surety Bond Producers (NASBP), an organization supporting surety agents and brokers, defines a surety bond as “a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee).”

Surety agents and brokers play a vital role in securing this essential coverage for their clients—and will be more important than ever as these long-awaited infrastructure projects begin to ramp up. Now’s the perfect time to improve your knowledge of the surety market and prepare your agency marketing capabilities. 

Here are five strategies to ensure your agency is ready to tap into the new opportunities for public construction projects that need to be bonded:

1) Establish prospects in current book of business. One of the first steps to building a successful surety book is understanding what your agency’s current book of business looks like.

If your property-casualty agency has a well-rounded book of business, there are likely many potential surety accounts you can pursue. In fact, when it comes to commercial surety bonds, if you aren’t already handling your clients’ commercial surety needs you are effectively leaving premium and commission on the table and not fully servicing your customers. 

As far as contract bonds are concerned, any type of nonresidential construction or contractor business your agency sells is an obvious place to start for marketing your surety bond capabilities. Take the time to dig into the work that your contractor, general contractor or subcontractor clients perform. If you have construction clients working on public jobs that are paid for by taxpayer money, such as libraries, roads or other public buildings, those jobs most likely need to be bonded.

Contractor certificates of insurance are another good place to look for potential business. Any subcontractor listed for a particular job may, in the future, have a need for surety bonds. This is also a great place to fish for p-c contractor prospects if you aren’t fishing there already.

Don’t be afraid to start with small surety accounts. Learning about the surety market will take time, and a different mindset and larger skillset are needed when you start to write larger contract bonds.

But it’s not just contractors that may need surety bonds. Every other type of business, from attorneys to auto dealerships to farmers to retailers, is required to have a commercial surety bond in force. Public entities, such as municipalities employing public officials, sheriffs and notaries, need commercial surety bonds as well.

Most commercial surety bonds are smaller in terms of premium dollars, but they are a good place to begin establishing your agency’s surety book and building client relationships. Commercial surety bonds are also an additional exit barrier to keep that client’s business within your agency. Keep in mind that they are getting those commercial surety bonds from another agency, if not from yours.

2) Become a surety market expert. Don’t be overeager to jump into a business you don’t yet understand. To be successful at selling any product, you must know what you’re selling. Once you’ve determined your agency’s surety opportunities, begin building the knowledge base and skills needed to become a surety expert.

The biggest difference between commercial surety bonds and contract surety bonds is that commercial bonds are more transactional and for smaller dollar amounts compared with contract surety bonds, which can range from small to hundreds of millions of dollars.

Every state, county and municipality has legislation and legal surety requirements that professionals must abide by. It’s important to be aware of what those are in your area so you can ensure your clients have the proper bond and other coverages.

Having a strong foundation of surety knowledge and sharing that knowledge with your clients also helps build the trust that is needed for them to feel comfortable bringing you their surety business. This will be particularly important if they’re considering leaving their current surety bond producer. Clients need to know they will be getting the same service—or better—if they work with you.

There are plenty of resources available to assist with learning the ins and outs of surety bonds and related laws, such as NASBP, which offers risk management courses and events, and The Surety & Fidelity Association of America (SFAA), an organization that offers surety “advocacy, outreach, promotion and education.”

Associations specifically geared toward the construction industry or contractors, including the Associated General Contractors of America (AGC), also offer valuable educational and training opportunities, as well as industry and safety-related news. Many local construction associations or publications can also provide insights and industry news in your area.

3) Be a trusted surety resource. The new infrastructure law will create plenty of construction opportunities and many construction companies are looking to grow.

According to Deloitte’s 2022 engineering and construction industry outlook, “both residential and commercial segments are expected to present substantial opportunities for [engineering and construction] companies compared with 2021.” Additionally, 91% of respondents said their business outlook for 2022 was “somewhat or very positive,” which represented a 23% increase over 2021.

Deloitte cited the new infrastructure law and strong interest in residential construction as driving the industry’s growth and optimism. While this is good news for your construction—and potential surety—clients, the market can be a volatile and dangerous segment. Some of the planned projects might not necessarily be in your client’s area of expertise.

A good surety producer is really a partner to their client. It goes without saying, but long-term, lucrative client relationships are built on trust. Once you start building relationships with surety clients, it is imperative to keep open and honest lines of communication about their business. You should be intimately familiar with your client’s work experience and if they are qualified for the jobs they are bidding. 

To help them understand their exposures so you can ensure they are well-positioned to grow their business—and yours—connect clients with outside resources like SFAA or AGC that can provide them with education and training in areas they want to learn.

In January, SFAA and NASPB launched a free mentoring program in partnership with other construction trade associations that is designed to help “small, new, emerging, minority-owned and other disadvantaged contractors learn how to qualify for construction surety bonds.” The new Contractor Bonding Education & Mentoring Program includes online learning modules and an optional mentor program with surety industry professionals.

4) Build surety market relationships. Experienced surety underwriters can provide agents with a wealth of knowledge and expertise on the surety market. It is critical to partner with reputable companies with a proven track record of surety business to support you and your clients.

Good underwriters will assist you in anticipating client needs and navigating potential challenges or exposures, as well as ensure you are on top of emerging risks, such as material and labor shortages.

Working with top-quality surety underwriters that are responsive, competitive and add value to your client relationships will enhance your current client experience and open the door to more business.

5) Update your agency marketing. Once your agency’s surety business is up and running and you have a solid roster of surety markets to place business with, it’s time to start marketing your surety expertise.

A successful surety bond producer can clearly articulate to business prospects what differentiates them from other agents. One way to do that is by keeping a pulse on surety resources and new developments and sharing that information with potential clients.

Ultimately, the most important thing you can do to attract surety business is to be visible. Businesses can’t come to you if they can’t find you. Make sure your website is up to date with easy ways for potential clients to contact you. Take advantage of social media, especially LinkedIn, where you can join construction groups, share content and engage with people reading it. Your surety partners likely have great marketing materials to share that will not only educate clients on surety terms and underwriting criteria but will elevate your status with them as a knowledgeable resource on surety.

Surety organizations like SFAA and NASPB can also connect you with business opportunities and leads in your area and offer networking events. Also, attend community events where you can meet local contractors and get to know them on a personal level.

Because many contractors operate as sole proprietors with their personal and business accounts linked, it can be a painful and rigorous process to change sureties. You may experience some reluctance from clients at first. To ease their hesitancy, keep your name in front of potential clients and continuously reinforce your expertise with clear messaging. You can also set yourself up as their backup if something happens with their current surety provider and they need someone else to turn to if they have problems acquiring a bond.

Partner with your surety companies for assistance in building relationships with prospective contractor clients. A great surety partner will be eager to help you grow your book of business and help you succeed.

Establishing a successful surety business may not happen overnight, but with many surety bond specialists getting ready to retire, new contractor startups, a healthy economy and infrastructure spending, your efforts now will pay off in the long run.

Traci Catalano is senior vice president of marketing at Old Republic Surety.

Wednesday, June 1, 2022
Commercial Lines