One of the competitors to this agency is proudly advertising its “in house” underwriting authority as if it is something that, well actually matters. This competitor has on the homepage of the website touting in house authority, it actually pays to advertise in several on-line publications that it has in house authority to approve performance and payment bonds of $350,000 single bond and $700k aggregate program. The question is, why does this matter? The answer is, it doesn’t.
This agency has had the authority to approve performance and payment bonds since its inception in 2003, furthermore, this authority is far more than the stated levels of the above mentioned competitor. Despite these facts, this is the first time we have ever revealed that we have the binding authority for construction surety bonds. The reason being, it simply does not matter. The competitor that advertises about the authority is still subject to the same underwriting guidelines as an agent that does not have the authority. I know what these guidelines are very well, as it was this agency that helped draft the guidelines.
If you are a contractor and you are looking for professional surety representation, make a few phone calls. Does the agent on the other side of the phone ever worked on the company side of the business? How many years of surety bond experience does the agent have? If a contractor wants to grow its surety program these two questions are lot more important than the ability to approve a bond, within the strict underwriting guidelines of a the surety company.
Why is it important that an agent has experience with a surety company? The surety companies are the ultimate decision makers. Even with the “in house” authority, the decision to say yes or no to the bond was still made by the company as it was the company’s guidelines that actually made the decision. Without experience working for the actual decision makers, it is impossible to understand how decisions are made at the company level. The worse thing an agent can do to a contractor is make a submission to the company without at least having an understanding of the issues the surety company will have. The agent needs to be good at pre-qualifying a contractor for surety credit before the account is submitted to the surety carriers.
In conclusion, in house authority to provide performance and payment bonds is a gimmick at best. It really means nothing in the real world.