Insurance can be a risky business. And it is even riskier if you are not offering your clients the complete protection they need to operate in compliance with local, state and federal bond requirements. After all, they count on your expertise to guide them through the process, so it's key to provide the support they need.

If you have commercial lines clients, it is important to have a full catalog of commercial surety bonds at your disposal. If you don't offer them, another insurance agency could step in and provide this service for them instead.

With a little preparation, you can make sure you do not miss out on the high-profit cross-selling opportunities that are right at your fingertips.

What Is a Surety Bond?

Surety bonds are not insurance. Rather, they are assurance. Unlike insurance, a surety bond is a three-party agreement between an obligee, a principal and a surety that guarantees performance. While insurance policies provide a payout to the insured following a loss, surety bonds are more similar to financial instruments, essentially acting as credit that functions on the premise that no losses will occur.

If a surety does not believe a principal can perform their tasked duties, the surety will not issue a bond. In some cases, both bonds and insurance may be required for a given project.

There are thousands of different types of surety bonds. Some surety bonds provide coverage for—or ensure compliance with—local, state or federal licensing and permit requirements. Other surety bonds guarantee payment of tax or other financial obligations. Contrast commercial surety bonds with contract bonds that guarantee performance of an underlying contract.

A Closer Look at Clients' Needs

The best way to set yourself up for opportunities with existing insureds is to regularly review your clients' business operations and any growth plans they may have. Constantly look forward, making sure they continue to be protected as their businesses evolve.

For certain businesses, such as car dealerships, health clubs and contractors, bonds are required before they can even open their doors to customers. For clients with existing businesses who are expanding into a new jurisdiction with different bond requirements, you as their agent can play a key role in helping them comply with any new requirements.

What to Look for in a Surety Provider 

Since most bonds are third-party requirements, there is little a surety carrier can do to differentiate coverage. That said, while many carriers offer bonds, not all are created equal.

Strong surety partnerships are built on underwriter accessibility and differentiated through consistency of appetite, speed of service and a commitment to quality. A carrier that delivers this value to an agent, shoulders the effort, which increases insured loyalty and supports the growth of an additional profit center within the agency.

Leadership within the surety provider and the agency should encourage producers and underwriters to think creatively—starting with the premise that no submission is a bad submission. It is important to work with a carrier that strives to be curious versus judgmental. Seek an underwriter who wants to deepen their understanding of your client demographic and the bond markets in your territory. 

John Weiland is vice president of commercial surety at Nationwide's National Bond Center.