Revenue Hiding in Your Book of Business

By Jaime McGrath | October 4, 2021

Most independent agents overlook surety bonds as an additional product they can offer their clients. They believe surety is too much of a niche specialty. The bonds are difficult to write, and best left to larger firms, which often are competitors. So why lose your clients to your competition when you can benefit from surety bond premiums? If you want to increase your book of business, there are two things you need to do first. Know what types of clients might need bonds and partner with a trusted surety bond expert.

Let’s begin with your existing customer base. Some numerous occupations and trades require commercial bonds also known as license and permit bonds. If you write insurance policies for residential or commercial contractors, this could be a gold mine. They can include carpenters, plumbers, HVAC, electrical, painting, irrigation, solar, and roofing contractors, etc. In addition, contractors bidding on certain types of construction projects, especially government, will need to secure contract bonds.

Federal legislation known as the Miller Act requires contractors working on federally funded projects valued at more than $100,000 to purchase performance and payment bonds. These types of bonds are also an excellent source of premium, so it’s important to be aware of this and stay on their radar.

Auto dealers in most states need auto dealer license bonds and this can include recreational vehicles, boats and yachts.

Individuals also may need a title bond when a vehicle’s original title is lost, stolen or destroyed. Retail businesses may be required to obtain bonds for sales tax, alcohol, tobacco and the lottery. If you have a client that is a trucker or in the freight broker business or a client that runs a driving school, they will need a bond called a BMC-84 bond.

Other service industries such as real estate and mortgage brokerage firms, finance companies, collection agencies and tax preparers will need bonds, depending on state requirements. Lawyers and individuals may require various court bonds such as judicial and fiduciary bonds. And don’t overlook that all these different types of businesses may need an ERISA fidelity bond for their company’s employee benefit plan. Most of the commercial bonds mentioned can often be issued the same day and with very little or no underwriting. Others are more credit sensitive and will require a little more financial information from the company or individuals.

So how much revenue can an independent insurance agent expect from co-writing surety bonds? This amount depends on the percent of the commission agreed upon, but it is usually 10% to 15% of the premium. A freight broker bond at a $1,500 premium, for example, will yield an agent $150. An auto dealership bond at an average rate of $250 will yield the agent $25, and most dealerships have multiple locations so this adds up quickly. Many commercial license bonds renew annually providing an automatic source of commission with little or no effort. And contract bonds for large construction projects written together can yield several thousands of dollars.

After identifying what types of your existing clients may have needs for commercial or contract bonds, establish a relationship with a wholesale bond-only surety partner, one that doesn’t write insurance policies, so there is no conflict of interest. They should have experience with your types of clients, in-depth knowledge of the products, access to multiple surety markets, provide excellent customer service, and be trustworthy. And team up with a surety agent that pays competitive commissions for all the bond referrals your accounts bring in.

So, take a closer look at your current book of business, and you’ll discover additional revenue opportunities staring you right in the face.

Topics Profit Loss

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Insurance Journal West October 4, 2021
October 4, 2021
Insurance Journal West Magazine

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