Taylor Rutledge, Chief Growth Officer at Propeller Bonds, provides surety bond insights for small businesses in this issue of 3 Questions.
Surety bond companies like Propeller Bonds are important partners to us in providing risk management tools to small commercial businesses. We spoke with Taylor Rutledge, Chief Growth Officer at Propeller Bonds to dig a little deeper.
As the Chief Growth Officer at Propeller Bonds, my primary focus is to drive innovation and foster accessibility in the surety bond industry for agents, brokers, and their clients.
There are a few ways we accomplish this. One is through investing in the development of a user-friendly digital platform that streamlines the surety bond application process. This platform leverages automation and digital capabilities to make it easier for agents and clients to understand their requirements, submit necessary documents, and receive approvals promptly.
We also like to provide education and resources. This includes webinars, tutorials, and online resources to demystify the bonding process, explain the benefits, and provide guidance on navigating surety bond regulations and requirements.
We don’t just streamline transactional surety business; we truly provide customized bond solutions for our agencies’ clients. These address the unique business needs and challenges that require a specific bond and/or special programs.
We excel at working with various partners and forming other affiliations. We have established many strategic partnerships with industry associations, alliances, insurance networks, and other relevant organizations to expand our reach and offer exclusive benefits to their members. Collaborating with entities can help us better understand the needs of agents and their clients while also providing valuable networking opportunities.
By implementing these innovative approaches and initiatives, we aim to make surety bonds more accessible and the process of procuring them more efficient for small businesses and agents, ultimately driving growth and success in the industry.
Underwriting for a surety bond differs from underwriting for standard admitted market insurance because surety is not insurance. It is a credit product. Insurance underwriting focuses on the assessment of risk and the likelihood of a loss occurring. Surety bond underwriting is primarily concerned with evaluating the principal's ability to fulfill obligations and mitigate potential losses, but losses are not expected.
Here are the primary elements underwriters evaluate when they receive a surety submission:
Principal evaluation: Surety bond underwriting begins with a thorough assessment of the principal (the party required to obtain the bond), including their financial stability, creditworthiness, industry experience, and reputation. Underwriters examine the principal's financial statements, credit history, business operations, and track record to gauge their ability to fulfill the bond terms.
Obligation assessment: Underwriters carefully review the terms and conditions of the bond obligation to understand the scope of the principal's responsibilities and potential risks involved. They assess the nature of the obligation, the likelihood of default, and the potential financial impact of non-performance.
Indemnification: Unlike insurance, where the insurer bears the financial risk of a covered loss, surety bonds involve indemnification by the principal. So the principal is ultimately responsible for reimbursing the surety bond for any losses incurred. Again, it is a credit product similar to a bank loan, which requires repayment by a company that borrows and uses loan funding.
Risk mitigation measures: Underwriters assess the principal's risk mitigation measures and management practices to determine their ability to prevent losses and fulfill their obligations under the surety bond. This may include evaluating the principal's internal controls, safety protocols, project management capabilities, and subcontractor relationships.
Project or contract evaluation: For contract bonds, such as bid bonds, performance bonds, and payment bonds, underwriters evaluate the specific project or contract requirements, including the scope of work, contract terms, project timeline, and potential risks associated with the project. They consider factors including the project's complexity, size, location, and the principal's expertise in completing similar projects.
Financial analysis: Underwriters conduct a detailed financial analysis of the principal's financial statements, cash flow projections, liquidity position, debt obligations, and overall financial health. They assess the principal's ability to meet financial obligations and withstand economic downturns or unforeseen challenges.
Industry and market trends: Underwriters stay informed about industry trends, market conditions, regulatory changes, and economic indicators that may impact the principal's business operations and ability to fulfill their surety bond obligations.
Overall, surety bond underwriting focuses on evaluating the principal's character, capacity, and capital to assess their risk of default and ensure that the surety can rely on the principal to fulfill their obligations. It requires a comprehensive analysis of various factors beyond traditional risk assessment, emphasizing financial strength, expertise, and commitment to performance.
Integrating surety bonds into an agent's portfolio of offerings and maximizing cross-selling potential requires a strategic approach that focuses on education, relationship-building, and identifying synergies between surety bonds and other insurance products.
Client needs assessment: Conduct comprehensive client needs assessments to identify potential bonding requirements and opportunities within the client's industry or business operations. Understand their current and future projects, regulatory obligations, and risk management needs to tailor bond solutions accordingly. Not every client needs a surety bond, but the client generally knows, based on their industry and type of work, if they do need one. An agent should be asking about surety with their clients just like any other line of business.
Education and training: Invest in education and training to gain a thorough understanding of surety bonds, including different types of bonds, underwriting requirements, and industry-specific considerations. This knowledge will enable agents to confidently discuss surety bond options with clients and identify opportunities for cross-selling.
Promote value proposition: Clearly articulate the value proposition of surety bonds to clients, emphasizing the risk mitigation benefits, financial protection, and credibility enhancement that bonds offer. Highlight how bonds complement other insurance products and contribute to comprehensive risk management strategies.
Cross-selling opportunities: Identify cross-selling opportunities by examining clients' existing insurance portfolios and identifying gaps or areas where a surety bond could provide additional coverage or protection. For example, clients purchasing commercial property insurance may also require license and permit bonds for regulatory compliance.
Industry specialization: Develop expertise and specialization in specific industries or sectors where surety bonds are commonly required, such as construction, transportation, or professional services. By understanding the industries’ unique bonding needs and challenges agents can offer tailored solutions and differentiate themselves from competitors.
Marketing and communication: Incorporate surety bonds into marketing materials, website content, and client communications to raise awareness and promote bonding services. Highlight successful bond placements, industry expertise, and the benefits of working with a knowledgeable agent who understands bonding requirements.
Referral programs: Implement referral programs to incentivize existing clients, business partners, or professional networks to refer new clients who may require a surety bond. Offer rewards or incentives for successful referrals and cultivate relationships with referral sources to generate ongoing leads.
By employing these strategies and techniques, agents can effectively integrate surety bonds into their portfolio of offerings, maximize cross-selling potential, and provide added value to clients seeking comprehensive risk management solutions.
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Taylor Rutledge, Chief Growth Officer at Propeller Bonds, provides surety bond insights for small businesses in this issue of 3 Questions.
The fourth installment in the Bold Penguin series on The Evolving Risks Of Small Businesses addresses the changing landscape and need for surety bonds.