Digitization has been a long time coming for the surety bonding industry, and there’s no better time to get started than now. Much of the industry is moving toward an electronic future, exploring what that looks like and how to face the challenges that exist on the path. For surety groups unable to build and maintain their own surety systems, third-party software solutions can help usher them into the next century of bonding.
One Century Versus One Year of Realizations
In 2020, the top 100 writers of surety bonds wrote $6.6 billion in direct premiums, according to The Surety & Fidelity Association of America. The top 10 alone wrote $4.2 billion. Some of those top 10 companies have the resources to create their own digital platforms that can handle the complete processing of bonds. For the other 90 or so companies, the cost and bottom line usually do not justify building and maintaining a platform internally—especially when both government agencies and obligees have been hesitant to give up the false sense of security behind the antiquated wet signatures and raised seals that have been a part of the business for 100 years.
The events of the past year and a half, however, have been a huge wake-up call for the industry. Surety was by and large, as a trade sector, taken aback by its inability to do business in person. Many sureties, businesses and obligees were forced by pandemic lockdowns to come to terms with accepting electronic or digital bonds, as well as the security that is in place for them.
Today, there is greater engagement in the conversation toward digitization of the surety industry. Some organizations have even dedicated significant time and resources to updating their systems to a digitized, streamlined process. As a whole, the industry is beginning to understand the necessity of digitization and address the challenges that come with it.
Roadblocks to Digitization
Oftentimes, surety groups are part of much larger property and casualty organizations and, as a result, need to compete with other specialty lines of insurance to secure the appropriate resources. A surety’s contribution to its parent company’s bottom line is not insignificant, but organizations can lose sight of that by being focused only on the top line. Ultimately, surety groups end up losing out on a fair share of the organization’s resources.
At the same time, in-house-built and customized platforms that perform all the necessary functions a surety business needs can be expensive not only to build out but also to maintain, adding to the difficulties that can set digitizing a surety business back.
Even surety businesses that moved to digital platforms in the past now find themselves with legacy systems that are no longer functional. These systems may have been built 10 to 15 years ago but were not updated over the years, resulting in systems that have been outgrown by the technology around them and are no longer supported by certain browsers. Building a platform isn’t enough; having the resources to continuously maintain and update it is critical.
Preparing for Digitization
Surety groups looking to modernize should start by performing a 360° assessment of their organization. They should identify each group and individual and what their focus is—really taking the time to figure out who is doing what at a granular level. Ask yourself: How do we do business? How broadly do the organization’s different segments vary in what they do?
As part of this self-assessment, map out the organization’s workflows and processes to help get a better handle on its current state. Find where there are similarities in tasks and functions as well as differences in workflow and how things get done to piece together what functionality is needed from a digital platform. After forming an understanding of how things are done today, start analyzing what the desired future state is. Knowing where you stand today will help you build the bridge to get where you want to be.
If there is no difference between how your surety is functioning today and how you’d like it to function in the future, then there’s no need for improvement. But consider this: Do you have the resources over the next decade to continually update and improve your group’s digital processes?
For electronic surety platforms to stay current, secure and future-proof, they need to be continuously updated and enhanced. These challenges are significant and daunting for any one company to handle. Third-party surety software can provide customizable solutions for surety businesses without breaking the bank on the resources of cost, time and manpower.
Simply put, bonding at the speed and technological inefficiency of the past century is no longer tenable. It is a disservice to businesses and obligees, who need improved speed of business, access to information and the ability to verify information. In the final analysis, the digitization of surety bonding is faster, less expensive and more secure.
