Claims

[Bond Magician]

Why are there so many claims filed on ICC bonds? What exactly makes this type of bond so hazardous to surety companies?

[Surety Queen]

Originally Posted by Bond Magician

Why are there so many claims filed on ICC bonds? What exactly makes this type of bond so hazardous to surety companies?

That's a tough question. All it takes is for one company to say that a trucking company hasn't paid them for a claim to arise. It seems to happen quite often. Because of the higher number of claims, Surety companies do consider it somewhat hazardous.

[marietta68]

Originally Posted by Surety Queen

That's a tough question. All it takes is for one company to say that a trucking company hasn't paid them for a claim to arise. It seems to happen quite often. Because of the higher number of claims, Surety companies do consider it somewhat hazardous.

The "hazard" is primarily the number of claims and not the severity of them. There is a high incidence of transposed numbers on records which makes records reconciliation difficult - if the payment of tariffs is delayed as a result, bingo, you've got a claim and the involvement of an additional level of staff at the bond company - thus, increasing expenses. Consequently, the letter of credit option is the most efficient solution for the need. The bonds are written from time to time for very large, financially sound companies, but even then, any claims activity, real or nuisance, will result in cancellation.

[Surety Queen]

Originally Posted by marietta68

The "hazard" is primarily the number of claims and not the severity of them. There is a high incidence of transposed numbers on records which makes records reconciliation difficult - if the payment of tariffs is delayed as a result, bingo, you've got a claim and the involvement of an additional level of staff at the bond company - thus, increasing expenses. Consequently, the letter of credit option is the most efficient solution for the need. The bonds are written from time to time for very large, financially sound companies, but even then, any claims activity, real or nuisance, will result in cancellation.

That's true, but for a small company with very little working capital, the trust fund can be a burden financially. There are new programs available now where the premium could be as low as $500 for the BMC-84 with no collateral required. Owners of the company would need to have strong personal credit as well as home ownership. To determine if a company qualifies for the preferred rates, they can visit the following link to apply under no obligation.
ICC Bonds - Surety Bond Types

[Admin]

Great info everyone!

I think the best action for any freight broker changes on a case by case basis...

However, those that qualify for the bond with no collateral at a good rate should always go with the bond, as it frees up capital and saves money.