Can't Live With Them, Can't Live Without Them: Bonding Companies

"I don't know what you want unless you tell me."

"Nothing is ever enough for you."

"No, those pants don't make you look fat."

Sound familiar? Have you uttered these words? Were you talking about your romance life, or your bonding company (except for the pants comment.)

It turns out that much of the frustration we have in life arises from a failure to see things from another point of view. Husbands and wives know this. But the good news is that there is a common solution. Open communication and good listening skills are the key. Can this be applied to suretyship?

"What's with all the Questions?!"

This is a good place to start. Why do bonding companies ask so many questions? And just when you get to the end of round one, they think up more. It's like they don't ever want it to end!

Answer: To a degree, it doesn't ever end. That's because the credit analysis a surety performs is based on info that constantly changes - and will do so without notice to the surety. They have to keep a finger on the pulse to be confident when issuing bonds.

"Why do I have to give my personal indemnity ANDpay a premium for the bonds?"

It seems like the bonding company is taking no risk and they get paid for it!

Answer: Actually, personal indemnity does not guarantee that a surety will not have a net loss on a bond claim. When a claim occurs, the company owners may already be depleted (trying unsuccessfully to resolve the problem.) When the "stuff" hits the fan, the surety has to foot the bill and the indemnity may be worthless.

"Do these pants make me look fat?"

When contractors start to pursue an excessive work load the bonding company may put the brakes on. They don't want the company spread too thin with insufficient management and financial resources. Actually, dying from an excessive amount of work (too fat) is more prevalent than the opposite.

The surety wants to be sure the client remains stable and able to perform their work - and thus avoid any possibility of a bond claim.

Conclusion

Are bonding companies unfathomable, impossible to understand? No, it's just that, unlike insurance companies, they are risk averse. They operate on a very thin margin and problems (claims) of any size can hurt them. Their very survival depends on being prudent and conservative. This means ask questions and move forward with caution.

So now, can you love your surety? Maybe a little bit...

Steve Golia is the Marketing Manager for FIA Surety, a bonding company that specializing in contract surety, site and subdivision bonds.

Call Steve with your next surety need: 856-304-7348

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