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| News Managing the Contractor/ Agent/Surety RelationshipMichael Boucher, Senior Vice-President September 20, 2006 As many contractors know, establishing the right bond program for their company is a work in progress. Those contractors who manage their agent and surety relationships to their advantage enjoy larger bond programs and overall preferred results with fewer hassles or surprises. Just like there are contractors who specialize in certain areas of construction, there are also insurance agents who specialize in insurance and bonds for construction companies. Find an agent you like, you can trust, and is a professional surety agent - preferably a member of the National Association of Surety Bond Producers (NASBP). Ask for names of other contractors he represents. Ask how long the agency has been in business and with which bonding companies they have contracts. How well does the agent know the underwriters and who are his contacts with these bonding companies? Agents who know the business and are respected by the local representatives get the most from the underwriters, which in turn gets the most for the contractor. Keep your agent informed. Get together frequently, either for fun, business or both. Let him know what you are working on and/or exploring (larger or different types of projects, new locations, etc.). A past dean of the surety business had a saying: "The Wings of Profit are not made for Long Flight". Surprises don't help either. Keep your agent informed and count on his advice. An agent who has worked with many contractors over the years has seen a lot of good and a lot of not so good. He should be able to offer consultation on how a particular event (large equipment purchase, ownership change or purchase, large spike in backlog, down year, etc.) could have an impact on your overall bond program. Establish minimum guidelines for when information is to be provided to your agent. Other than the fiscal year-end financial statement which is a given, what needs to be provided throughout the year depends on your individual bonding needs. Interim financials - how often? Work in process schedules - again, how often? These questions should be discussed with your agent. Providing information may take some effort but it may also allow for more surety credit. Finally, buy your agent lunch. Like anyone else, if they know you appreciate their efforts, they will work that much harder. Surety Underwriters Relationship Assuming the above is getting done, you are working with your agent, and you are receiving the bonds you are requesting, it is also important to get to know your underwirter and vice-versa. The more each of you (contractor, agent and underwiter) feel comfortable with each other, the better each will be able to meet the other's needs. Meet with your underwriter and your agent after the fiscal year-end financial statement has been reviewed. At this meeting many items should be discussed, such as:
This is a time for the underwriter to get updated on your position and to ask questions. But, it is also a time for you to get updated. How is the bonding company performing financially? What kind of year did they have? What are the bonding parameters the underwriter feels comfortable with regarding your company and do these meet your needs as well? What can you do to help the underwriter increase your bonding limits? You can help the underwriter address any issues that might need further explanation when presented to his authorities. It is a two-way street - ask questions. Barring any other reasons to meet throughout the year, this annual meeting is typically enough to keep in touch with your underwriter. The information provided by your agent throughout the year keeps the underwriter current, unless something comes up that warrants a face-to-face meeting. I have found those contractors who understand the importance of managing these relationships and do so, benefit the most from their efforts and time spent. |