KEY TAKEAWAY:
--Surety bonds can broaden an agency's offerings, provide a steady revenue stream by deepening relationships with customers and keep rivals from gaining a foothold with the agency's clients.
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Surety bonds play a crucial role within the insurance industry, providing protection for taxpayers and governmental entities, opportunities for clients to engage in contracted or permitted work and profitable business for both carriers and agencies. Despite the significance and profitability of surety, however, there remains a misconception among some insurance professionals that providing surety services is neither a competitive advantage nor necessary for their business. This line of thought can be very costly.
With the global surety market projected to reach more than $25 billion by 2027, insurance professionals must consider integrating surety bonds into their client services to not only stay relevant in a rapidly changing industry but also expand their range of services to create additional revenue streams and appeal to a broader audience in need of surety bonds.
Surety services offer dual advantages that can enhance insurance business operations and create opportunities for growth for both an agency and its clients. Mostly required by separate entities within the government, construction or real estate sectors, surety bonds guarantee that a party will fulfill contractual or licensing obligations. Understanding the benefits of surety bonds will enable insurance professionals to understand their value and leverage surety to the benefit of all parties.
Let us first look at how surety bonds can provide a profitable stream of business to carriers and agents:
Surety bonds can significantly enhance an agency's product offerings. By integrating surety services into their product offerings, agencies can differentiate themselves from competitors and attract new clientele. The nature of surety bonds is to provide protection for third parties who want to enter into a business relationship with companies. The bond protects those parties by providing a safeguard against potential default and financial risks they might suffer. This extension of services can help agencies attract new business by providing services with which other agencies may stumble.
Agencies can boost their revenue streams with surety. Surety bond premiums offer agencies a consistent and reliable income to improve their bottom line. By forging long-term relationships with clients with significant surety needs, such as construction businesses, real estate firms and mortgage brokers, not to mention the surety companies themselves, agencies will receive repeat business and referrals from loyal customers.
Agencies can become the go-to surety provider for business owners within their market, which often leads to more opportunities. When you help a client with something as potentially complex as a bond, they will come back for other lines!
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Surety bonds can mitigate competitive risks to the agency itself. Surety is an excellent way for agencies to provide value-added services to their existing clients, especially because it is an area that can be overlooked. Think that little $100 premium isn’t an opening to a client’s overall insurance program? If you neglect it, that may be all a competitor needs to get in the door and put your client’s business at risk. With the addition of surety services, insurance professionals have the opportunity to strengthen their reputation as a trusted and reliable insurance provider while further entrenching their relationship with clients.
Additionally, surety bonds can be valuable to a client, offering benefits such as:
- Establishing trust and credibility among important stakeholders. By obtaining a surety bond, business owners demonstrate financial stability and reliability, assuring business partners and investors that they have the capacity to fulfill their contractual obligations. This trust-building element is invaluable in establishing long-term relationships and attracting additional business opportunities for the client.
- Increasing business opportunities with contractors and other parties that may require surety bonds for specific projects. Clients who possess surety bonds are better-positioned to seize such opportunities. This coverage allows clients to meet the necessary requirements, giving them a competitive edge in their respective markets. As a result, clients can bid on larger projects and attract more significant business ventures.
- Removing compliance liability with entities that require licensing or permits for business activities. With a quality agency and surety on board to allow for fast procurement of bonds, clients can be sure that they are in compliance with governmental entities that statutorily require a bond for the activity in question. Moreover, the client will always be ready for the next opportunity, knowing that the bond is just a request away!
Surety bonds offer plentiful advantages for both insurance agencies and their clients. By incorporating surety services into their product rosters, insurance agencies can expand their business, increase revenue streams and safeguard their clients’ insurance programs. On the other hand, surety bonds help clients establish their credibility as business owners, create opportunities for expansion and protect their business from possible compliance risks.
