Electronic bonding is the way of the future for the surety bond industry. Filing a surety bond electronically will allow agencies to issue a bond and the principals to obtain their bond in a shorter period of time. However, I think the use and integration of such a system is still a long ways off.
The technology is available, as well as the desire for such a system. What is holding the industry back? There are two major factors that keeps digital bonding from becoming a reality.
- Lack of organization of the sureties to create a standard for such a system.
- Acceptance of digital bonds by the obligees.
The bonding companies must get together to create this system. A handful of the largest sureties would be able to get other bonding companies to jump on the band wagon a lot easier than several bonding agencies. The sureties also have the financial backing to fund the project as well as the financial interest in it, as it should help all sureties to run more efficiently.
I think the second largest hurdle would be getting the obligees to accept a digital bond rather than a paper copy. In general, obligees are very stuck in their way doing things. When it comes to a state department, no one really wants to rock the boat and make any radical changes to the way things are done. I suppose they are afraid of any backlash of their suggestions.
The ICC accepts electronically filed surety bonds. To my knowledge, the ICC and DOT are the only obligees that accept electronic bonds. However, it is not a standardized system and creating a different system for each obligee would result in chaos and failure in the development of the standardization. Our agency is doing its part by being the first to offer electronic surety bond approvals. Unfortunately, we are limited to offering this system to only the following programs:
- Instant Approval Program:
- Mortgage Broker Bonds
- Mortgage Banker bonds
- Surplus Lines Broker Bonds
- Title Agency Bonds
- Bad Credit Bond Program
The first step is to have the system created, followed by the acceptance of it. As far as I know there is no committee on development of it, thus we will be waiting quite some time prior to seeing a standardized fully functional system in place.