Although Surety Bonds availability as a risk transfer tool in western countries is ancient, they are a new product in India. In the USA, Surety Bonds are so successful that they are mandated by law for public works contracts. Now, due to rising woes of bank guarantees in infrastructure works, Surety Bonds were recently introduced by GOI during the budget of FY 22-23 & First Surety bond Insurance product was launched on 19th December 2022.
To boost liquidity & capacity in the Indian Economy and to ramp up its growth rate, the availability of surety bonds in a similar fashion as in developed economies is crucial. But how to make this possible?
Surety Se7en experts answer this fundamental question here, & it’s self-evident that Surety Se7en is already executing this work-plan.
1. Awareness : Educating the masses
As Surety Bonds insurance is a new product, knowledge about it is limited. The first step towards its acceptance by the masses is educating them about what Surety bonds are, how they function & how they can benefit oneself. Once an Individual is clear on these basic concepts, they themselves would seek Surety Bonds.
2. Technology : Ease of use & Reaching the masses
Development & use of technological applications is very crucial in making Surety Bonds available to the masses. Here is how technology aids in Surety Bonds availability in the mass market –
- Automation & scaling
Firstly, Surety bonds can be available to the masses only when various systems like – to ask customers for their requirements, help them choose the right product for them, price the product, collect payment, deliver them the Surety Bond insurance and file & track any subsequent claims etc. could be automated & scaled. This is possible only through the development of technological applications online.
- Ease of Use
Also, mass acceptance of Surety bonds is possible only when it is convenient to purchase & use them. This can be achieved when self-service applications are made available online on various devices.
- Reaching the masses
Moreover, in this era of technology, all potential customers are present online. Making technological apps online is the only way to move forward with reaching the masses.
- Cost Reduction
Use of technology automates many of the administrative tasks involved in the insurance process, such as policy underwriting, claims processing, and billing. This helps reduce costs and make Surety bonds popular among the masses.
- Smart and Faster Claim Processing and Settlement
Finally, the worth of any insurance based product gets known only when a claim arises. Surety Bonds are no exception. Technology improves efficiency, accuracy, and speed of the claims process. Online applications allow bondholders to easily report and track status of their claims. Also, technology streamlines the process of collecting, storing, and accessing claims-related documents.
Surety Se7en, has made applications and technologies for the first time in India to make Surety Bonds available to the masses. Surety Se7en is further innovating market ready solutions to solve the Surety Bonds procurement problem in India as we speak.
3. Policy Making : Pushing GOI & Reinsurers
As Surety Bonds are new to India, establishing guidelines and standards for their issuance & use is a basic necessity. By promoting regulatory frameworks that encourage the use of surety bonds in partnership with GOI, IRDAI & reinsurers would help immensely in the growth of the Indian Surety market.
From the start, Surety Se7en has been voicing the opinion of benefits of Surety Bonds to the Indian economy – be it asking for Surety Bond insurance product with FISME to the recent push during the G20 meet hosted by India.
4. Pricing : appealing cost-conscious consumers
India is a price sensitive market. Setting the right price for the product is important in order to make it accessible to a large number of consumers. Surety Se7en has kept pricing reasonable for the products & services it is offering to make Surety Bonds popular. Many of Surety Se7en’s services such as Consultation, Proposal/Profile building are free. This allows businesses to give surety bonds a try & once they see the benefits in quantitative & qualitative terms, they become confident to use Surety Bonds.
5. Continuous Innovation : Feedback & progress
Continuous innovation is what fuels change and is essential to getting people to embrace Surety Bonds.
Speaking with numerous stakeholders engaged in surety bonds, including the end customer, the GOI, insurers, and reinsurers, provides Surety Se7en a unique perspective. The feedback received from all these parties allows Surety Se7en to evolve existing systems & create new ones to progress continuously.
To summarize, Surety Bond Insurance was introduced to the Indian market by GOI to save infrastructure companies facing huge problems with bank guarantees. Now, the key challenge lies in making Surety bonds available to the masses. All stakeholders of the Surety Bonds will have to take on this responsibility.
Surety Se7en, suggests & has undertaken steps towards this end :
- Educating and creating awareness for Surety Bonds utility.
- Developing online applications to make Surety bonds accessible to everyone.
- Collaborative & synergized efforts between GOI & all stakeholders are must for Surety Bonds to become a mass market product.
- It’s critical to set the product’s pricing prudently in order to make it cost-effective for a large number of consumers.
- This is not a one time effort, but requires continuous innovation based on feedback. Consistency, focus and discipline are necessary to achieve inclusion of an ever-increasing number of potential customers.