The more insurance products an agent can offer a client, the better opportunities there are for all parties involved—agent, client and carrier. An insurance agent that meets a client's needs as they arise—including offering, for example, a business owners policy, auto, workers compensation and surety bonds—is poised to play a key role in a client's business and retain them as a business partner. 

With demand for surety bonds remaining strong thanks to federal government legislation funding construction, as well as other surety growth areas such as fraud mitigation, agents who offer surety bonds will quickly become a valuable source for their clients.

Surety bonds present a prime opportunity for cross-selling, allowing agents to broaden their offerings and deepen client relationships. Here are four reasons agents should consider adding surety bonds to their mix of coverage offerings:

1) Always a need. For many businesses, there is a state or local requirement to purchase a surety bond to become licensed and continue operations. As a result, there will always be a market need for bonds from business clients. 

“We advise agents that surety is a great way to create sticky clients," says David Gonsalves, CEO at BondExchange. “For contractors, mortgage brokers and other financial services companies, maintaining a surety program is required to continue operating."

“Additionally, many insureds in need of a bond will also need more traditional lines as well. Surety bonds are usually one of many insurance requirements insureds must obtain to receive a license or work on a construction project," Gonsalves explains.

2) Building relationships. Underwriting surety often involves an intimate dive into the business and personal financials of the business and its owners. While some clients may not be aware of all the coverages their business may need, an agent who understands their overall business is in a better position to educate clients on what additional coverages they need.

“When they control the surety book, agents build trust and secure long-lasting relationships," Gonsalves says. “Agents often lose sight of the importance of surety due to the relatively low commission revenue versus other lines of business."

3) Surety specialists. As with many classes of business, surety is a coverage that requires knowledge and expertise when offering the product. For many agents, offering bonds may seem like a significant time investment. Shopping for quotes and administration work seems like it leads to little premium. However, utilizing or partnering with a professional bond agent is key to addressing underwriting questions and providing the information needed to acquire a bond.

“Most independent agents offer surety to clients as a way to keep the client 'under the tent' so an outside surety agent doesn't poach the other larger revenue lines," Gonsalves says. “We suggest that the typical agent with anything less than $25,000 in surety commission revenue should leverage a high-quality surety managing general agent to handle the service aspect of their surety book."

Agents who refer clients to surety specialists can earn referral commissions and transform potential losses into revenue-generating opportunities. Additionally, partnering with surety experts will also enable insurance agents to gain access to a vast array of bond products, enhancing their ability to cater to diverse client requirements with an expanded portfolio. 

4) Widening opportunities. The Broadband Equity, Access & Deployment (BEAD) Program, which provides upwards of $40 billion for placing affordable high-speed internet throughout the rural U.S, has found a conditional programmatic waiver of their letter of credit obligations in the latter half of 2023, according to a report by Brown & Brown, an insurance brokerage firm. The changes will allow Letter of Credit (LC) requirements to be waived if the applicant commits to having a surety bond issued in its stead.

Further, in February, the U.S. Small Business Administration increased the statutory contract limits for the Surety Bond Guarantee Program to $9 million for general projects and $14 million for federal contracts. These changes are expected to create more substantial contracting opportunities for small businesses, enabling them to compete for larger projects and federal contracts. Consequently, this can lead to increased demand for surety bonds and additional opportunities for agents.

Olivia Overman is IA content editor.