Q. Who is your bonding company?
A. Jimmy at the Smertz Agency
Am I the only one who thinks this is a strange answer? It always amazes me when contractors have no idea who their bonding company is. It could mean that the agency is doing a fantastic job of managing the account. But it is more likely that the contractor is doing a bad job of managing the relationship with the surety.
Who’s on first?
The bond agency plays a vital role in guiding the process forward, advising the client and supporting the underwriting process. But for the most part, the Bond Manager controls the underwriting decisions – even if some measure of discretionary authority has been granted to the agent.
To put it simply, the Bond Manager has life or death control over the bond account. If there is a bond the manager is not interested in supporting, the contractor can kiss those revenues and profits goodbye.
For major accounts that produce significant annual premiums and require substantial capacity, the surety will probably make themselves known. They may ask for an annual meeting to discuss fiscal year-end results and plans for the new year.
For smaller accounts, the contractor is just a name in a computer record. Flat. No personality or rapport. So when that stretch or exceptional bonding need comes up, they have nothing extra going for them. The gate keeper doesn’t know the contractor from Adam, and there will be no special consideration. How do you prevent this?
Manage the Bond Manager
The first step toward a good rapport is to establish open communications. The contractor’s file should make it obvious that full disclosure is provided and the surety is appreciated as a partner – not just a vendor. Answer all the written questions completely and candidly. It makes the reader confident that everything relevant (the good and the bad) is all being laid out for review.
During the initial evaluation, the underwriter should visit the contractor’s business. It is a chance to kick the tires and see the company in action. Hey, they’re not just a file, they’re real people!
A periodic underwriting meeting with the bonding company is appropriate. At IBCS, we like to meet with the contractors when a draft of the year-end data is available. This is a great opportunity to provide guidance before the final version of the financial statements is produced.
The point is that bonding is based on information and the underwriter’s confidence. Building a rapport with the decision maker is as important as any piece of information. With the help of the agent, Manage the Bond Manager and maximize the bond account for everyone’s benefit.