NEW YORK, April 24, 2000 — Insurance Services Office, Inc. (ISO) and Surety 2000 Corp. have become strategic allies to provide the first paperless, electronic verification of the authenticity of surety bid and performance bonds.
The electronic verification through the Internet is designed to eliminate the submission of fraudulent surety bonds by construction contractors to government agencies and other customers.
The strategic alliance will accelerate the expanded use of the Surety 2000 system by surety-bond agents, insurers, federal, state and local governments and other contracting agencies.
The Surety 2000 Bond Manager is the only system that electronically assigns a unique, tamper-proof authorization code to individual surety bonds. Surety-bond agents use the system to obtain the authorization code. When that code is included in a contractor's bid, a government agency or other customer can verify the associated bond's authenticity at no cost by entering the code through the World Wide Web to the secure Surety 2000 system.
Surety bonds issued by insurers provide financial guarantees of a contractor's promise to enter into the contract bid on; to perform according to the contract's specifications; and to pay laborers, subcontractors and suppliers.
"ISO's strategic alliance with Surety 2000 Corp. is a 'win-win-win' proposition for insurers, for surety agents, and for government agencies and others who rely on the security provided by surety bonds," said Frank J. Coyne, ISO's president. "We're pleased to help bring the industry this system, because it's a prime example of making valuable, practical use of the Internet to conduct secure business-to-business communication and real-time transactions."
"Our strategic alliance with ISO further validates our Web-based technologies in surety-bond transactions," said Charles Mark, president of Surety 2000 Corp. "We developed the Surety 2000 Bond Manager to bridge the technology gap between insurers and government entities, and the system has already been well received by major U.S. surety insurers and leading agents."
The Illinois Department of Transportation is accepting Surety 2000 authorization codes to replace paper bid bonds during the public bidding process. Pilot tests of the system are under way in other states, including Missouri and California.
Surety-bond agents typically have insurers' power of attorney to issue such bonds. Without Surety 2000, agents issue paper authentication of bonds to contractors, who include that authentication, carrying the insurer's corporate seal, with their bids — a labor-intensive, paper-based process that makes it hard for government agencies to verify that a bond was properly issued by an authorized agent or that the corporate seal is valid.
Fraudulent bonds expose government agencies and taxpayers to millions of dollars in losses. The Surety 2000 system is designed to eliminate the possibility of any individual's use of fraudulent documents and enable the surety industry to better manage the documentation process.
Surety insurers can use the Surety 2000 Bond Manager system to monitor their overall exposure resulting from bonds issued by agents on their behalf, to track bonds and their amounts issued by a particular agent or to a particular contractor, and to flag unauthorized transactions. Insurers also can use the system to effectively revoke powers of attorney granted to agents — a step that is difficult to execute when paper statements of power of attorney and corporate seals are provided to agents in bulk.
Agents can use the Surety 2000 system to obtain authorization codes for authentication. The agent enters bond information into a secure database on the Surety 2000 website, which references appropriate bond forms. The Surety 2000 system assigns the bond a unique authorization code and electronically notifies the insurer of the bond's issuance.
The contractor submits only the Surety 2000 authorization code in his bid, which permits the government agency or other customer to verify the bond's authenticity. The system can eliminate the agent's need to:
The system also eliminates the contractor's need to transfer the paper again to the contracting agency.
Surety 2000 Corp., based in Cincinnati, Ohio, developed and operates the Surety 2000Bond Manager system. The company plans to make the Surety 2000 system available to federal, state and local governments through a national sales force. For more information on the Surety 2000 system, call Elizabeth Kurz at 1-800-660-3263.
ISO is a leading source of information about property and liability risk. ISO provides statistical, actuarial, underwriting and claims information and analyses; consulting and technical services; policy language; and information about specific locations for a broad spectrum of commercial and personal lines of insurance. In the United States and around the world, ISO serves more than 2,900 insurers and reinsurers as well as agents, brokers, self-insureds, risk managers, insurance regulators and other government agencies.
Charles Mark (Surety 2000 Corp.)