The global surety market is growing by leaps and bounds, with various sources predicting it will be worth $25 billion to $27 billion by 2027. In the United States alone, the surety market was valued at $8.5 million in 2019 and is expected to reach $13.5 million by 2027. That’s a lot of commission on the table for insurance agents to take advantage of.
The vast majority of surety bonds sold fall into the Contract and Commercial sectors. Many of your commercial insurance clients fall into one of these sectors and if you’re not offering surety bonds as part of your agency’s lines of business, you’re leaving money on the table.
Surety Bonds Are Mandated for Many of Your Clients
Whether you’re looking to grow your corporate clientele or you already have a roster of B2B clients, having surety bonds in your portfolio is almost guaranteed to grow your business. Businesses like contractors, car dealerships, credit services, health clubs, medical device suppliers, auctioneers and others are required to hold bonds on the federal, state and/or municipal level.
Even solopreneurs like acupuncturists and notary publics are required to hold a surety bond in some states in order to be in business.
A few examples:
- In Florida, a travel seller is required to hold a Seller of Travel surety bond ranging from $10,000 to $50,000 depending on the services they offer.
- In Texas, a credit services company must file a surety bond in the amount of $10,000.
- In New York State, a car dealership must post a surety bond in the amount of $20,000, $50,000 or $100,000 depending on various factors.
- In New York City, a home improvement contractor must have a surety bond of $20,000 to be licensed.
- In New Jersey, a health club must hold a surety bond of no less than $25,000, up to $50,000
- Federally, a beer brewery must hold a surety bond of $1,000 (if they have an excise tax liability below $50,000).
The list is endless and applies to any number of businesses, particularly those that must be licensed to operate or make use of tax dollars.
Even individual clients may end up requiring a surety bond. For instance, someone who has been named the executor of a will is required by many states to post a bond.
Surety Bonds Provide Peace of Mind
Even when a surety bond isn’t required, having one can offer your client peace of mind. For instance, companies that have research and development divisions or businesses whose employees work in the customers’ workspaces (like a janitorial company) can choose to take out an employee theft bond that provides financial protection should one of their employees steal from them or their customers.
While these bonds may be smaller in nature, the ease of getting them issued via a partnership with a wholesaler like Propeller means you can earn incremental income with virtually no effort on your part.
Have contractors in your book of business? Performance and Payment Bonds are some of the largest bonds you can broker, especially if your clients do any work with local or state governments.
It may not be the norm, but Propeller has helped insurance agents get their clients Performance and Bid bonds upwards of $28 million dollars.
But let’s go with averages. An average Performance and Payment Bond for a construction company doing a municipal project is about $750,000. The one-time premium for that bond will typically be $22,500. At a commission rate of 20%, that’s $4,500. With Propeller, you can get 30% commission. Why give that commission to a competing insurance agent?
Surety Bonds Deliver Annual Dividends, Create Leads
Granted, the average commission amount for an annual commercial surety bond is lower. But why give up an extra $50 a year from a good chunk of your clients if it requires no work on your part at all? Working with a company like Propeller, which provides a bolt-on, fully automated purchasing system means all you have to do is sell the bond. The application process, credit check and bond issuance are done by Propeller. But you still get paid. And with automatic yearly renewals, the checks keep coming every year.
Even better, why waste time thinking about how the commission is only $50 when it very well might lead to hundreds or thousands of dollars in cross-selling other lines of insurance business?
Suppose for a moment that in some twist of fate your current clients have no need of surety bonds. New businesses that need a surety bond as part of their licensing or operational needs are opening all the time.
You know what else they need?
General liability insurance, property insurance, workers compensation insurance, business auto insurance, etc. Prospecting for new clients by making surety bonds a piece of your portfolio can lead to larger sales down the road.