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Surety Industry Associations Working Together to Automate the Bonding Process

More than 10 years ago, the National Association of Surety Bond Producers (NASBP) and the Surety & Fidelity Association of America (SFAA) created the Joint Surety Automation Committee. Its objective was to identify and explore technologies to streamline processes, reduce redundancies and increase productivity in the surety bond process, which spans the application for the bond, the execution and submission of the bond and the processing of premium. These efficiencies, the committee reasoned, would make the process easier and more efficient—not just for the sureties and producers, but more importantly for contractors and subcontractors. Currently, when a contractor applies for a surety bond, he provides information to the surety agent or producer, who enters the data into multiple carrier systems. Some agencies may work with as many as 100 carriers, each with its own proprietary system.

The Committee’s vision was to identify and develop ways to integrate surety bond transmission, security, verification, and data integration and encourage surety companies, surety bond producers, contractors, project owners, risk managers and other parties in the bond process to adopt these methodologies.

Joint Automation Committee

From Left to Right: Courtney Larson, Capitol Insurance Companies, Debbie Burton, Wells Fargo Insurance and Vice-Chair, NASBP Automation and Technology Committee, Nick Newton, Rudnik Surety and Chair, NASBP Automation and Technology Committee, Robert Coon, Scott Insurance, Dave Golden, NASBP

Nick Newton, vice president of Rudnik Surety, Inc.  and chair of the NASBP Automation and Technology Committee, said “Every year committee members from NASBP and SFAA meet in Washington, D.C., to discuss the most pressing technology issues affecting the industry. These meetings are productive and we always leave with a sense of accomplishment, knowing we are using technology to make the surety bonding process more seamless and efficient.” The Joint Automation Committee’s work has resulted in benefits for contractors and subcontractors.

In order to standardize the many forms required by agents and sureties, NASBP created and maintains a library of process forms for surety professionals. NASBP’s goal in 2014 is to provide seamless data transfer among surety bonding systems using ACORD data standards. NASBP and ACORD are now looking into other construction-specific standards organizations to ensure the fields are compatible using open standards so they are available to all key stakeholders in a construction project. NASBP plans to make these forms available in late 2014.

Until then, the NASBP Producer’s Tool Kit  has the following forms commonly used by agents and sureties:

  • Contractor’s Questionnaire;
  • Bid, Performance and Payment Bond Requests;
  • Work in Progress (simple and detailed);
  • Bank/Credit Reference Form;
  • Financial Statement Analysis;
  • Credit Report Authorization and Privacy Disclosure;
  • Personal Finance Statement;
  • Service/Supply Contractor Questionnaire;
  • Small Business Contractor Questionnaire; and
  • Status Inquiry.

Given the amount of sensitive and confidential information transmitted from the contractor to the agent to the surety, email encryption is essential to transmit information in a secure manner. NASBP has taken a leadership position on this initiative and is reviewing prevalent security and encryption products and services of which its members would like to be aware.  NASBP has provided producers with educational offerings and articles about the importance of secure data transfer and encryption of emails.

Attempting to streamline data transmission among all parties is a primary goal. Recognizing that data interchange among of multiple third party systems is inefficient, the Joint Automation Committee is looking for remedies for rekeying data, which  is time consuming and defeats the purpose of using this technology. Yet there are several inefficiencies that exist with the current sureties systems. Working closely with each surety company, the agents hope to utilize technology to automate this process and eliminate proprietary data. NASBP plans to create a survey to show the importance of addressing this issue. NASBP and SFAA will encourage sureties to distribute this survey to their top producers.

Mitch Epstein, Chubb Surety, and Chair of the SFAA e-Business Advisory Committee, noted, “The committees share several common goals, the realization of which will require the SFAA and the NASBP to work together, just as our association members do every day. Interoperability among disparate systems maintained by various construction industry constituencies is an outcome that will be realized through partnerships such as the Joint Automation Committee.”

A surety automation web site is being developed to educate the public on the importance of automation issues in the construction process. The website will be finalized in late 2014.

Other items on the Joint Automation Committee agenda are:

  • Mobile technology, specifically a “bring your own device” policy in which employees use their personal hardware and plan with reimbursement from the employer. The Committee is discussing issues of security and wiping data remotely, protecting confidential company data, how to deal with a lost device, establishing the line between personal and business data, and need for overtime for non-exempt employees using a shared persona/company phone.
  • Implementation of Windows 8 to accommodate cloud-based services and its advantages in a business environment. The Committee found that while Windows 8 showed promise, it may be premature to upgrade for most business environments.
  • Acceptance of electronic bonds. The Nevada Department of Transportation is transitioning to a paperless bonding system.