Independent insurance agents looking for low-hanging fruit to satisfy clients and boost their agency's profitability should look no further than commercial surety bonds.

The commercial surety market is booming in the U.S., thanks in part to federal infrastructure spending, which has triggered a steady flow of work for contractors—and an equally satisfying demand for commercial bonds.

The Bipartisan Infrastructure Deal, which was passed in 2021, is having a positive impact on the commercial bond market. That sweeping legislation has created thousands of jobs. It has also created work for contractors who need commercial bonds to win bids and protect their businesses. This is presenting huge growth opportunities for independent agencies that are looking to round out their commercial accounts.

There are thousands of commercial surety bonds available to help clients ensure the performance of an obligation and compliance with state- or court-mandated requirements. Three of the most popular commercial surety bonds include:

1) Fast, credit-based contract bonds. These quick and easy bid and performance bonds are designed for small and emerging contractors in all construction trades. They have an easy application process and can offer limits up to $1 million based only on a credit check, saving a lot of time and hassle for contractors, who are often seeking fast approval to win bids. Higher limits can also be considered with additional underwriting information.

2) ERISA bonds. This is a fidelity bond that protects 401(k) and retirement plans against losses caused by acts of fraud or dishonesty. The Employee Retirement Income Security Act (ERISA) requires that a fidelity bond be in place to cover the fiduciary and anyone associated with the management of the covered plan.

3) License and permit bonds. These bonds cover contractors who require legal licenses and permits to conduct professional work. They are used by professionals in a broad swathe of industries, from brewers to car dealers, attorneys and even insurance agents.

Low-Hanging Fruit for Independent Agents

Historically, some independent insurance agencies have avoided commercial surety bonds because they're more akin to lines of financial credit than traditional insurance policies. But ignoring commercial bonds is a mistake that could cost agencies both clients and revenue.

Many commercial bonds are quick and easy to underwrite. Agents can often satisfy their clients' needs the same day and with a few clicks of a button through immediate-issue bond programs. That low-touch but high-value service can reap huge rewards in client satisfaction and retention.

Further, commercial surety loss ratios are low and the business is sticky because bonds typically last for the duration of a contract or project, unlike commercial insurance policies that could be shopped around on an annual basis.

Additionally, there's room for commercial surety bonds in almost all sectors. For example, an independent agency with an extensive book of business in auto insurance could expand its services by offering lost title bonds, which protect against financial harm from losses sustained if the bonded title is issued to anyone other than a vehicle's rightful owner.

Meanwhile, insurance agents working with janitors, cleaners, caterers or any contractors that provide services on a customer's premises could add value to their clients by providing business service bonds, which protect against financial liability for the loss of the customer's money, securities or personal property caused by dishonest acts of any employees while on the customer's premises. 

As niche product offerings go, commercial surety is one of the more straightforward options. And with federal infrastructure spending poised to shore up more work for contractors across the country over the next several years, developing a solid commercial surety offering should be a no-brainer. The opportunities are vast and there is fruit ripe for the picking.

Chuck Lerchen is senior surety marketing representative at Old Republic Surety.