Jet Insurance Company did not originally plan to market to freight-broker surety bonds but did offer an online application that allowed the purchase of most bonds instantly online. Several freight broker surety bonds were purchased within days of each other which eventually led to a flood of claim submissions from carriers not receiving payment from the bonded broker. It was discovered these bonds were purchased fraudulently by a crime ring using stolen identities.

Around that time it was announced that several prominent surety carriers were leaving the freight-broker market and Jet Insurance Company should have taken this as a sign to shut down the ability for freight brokers to purchase the bond. Instead Jet launched a dedicated freight broker unit to see if there was an opportunity to understand the risk and write the bond profitably.

Credit-based underwriting was used in the surety industry for this bond, as it is for many other surety license requirements. It was quickly revealed that the underwriting method was incapable of appropriately determining risk of the applicants. Another strategy had to be developed.

It was clear that Jet needed to make sure the person applying for the bond is the owner of the business. Usually, people only purchase surety bonds for their business under their own name, but when you’re running a scam, your identity needs to remain hidden.

Jet’s freight unit also needed clarity to see if correctly identified owners had any connection to other businesses that had failed or been connected to fraudulent behaviors.

OpenCorporates was integrated into Jet’s underwriting process and has continued to be an essential tool for flagging high-risk applicants and connecting fraudulent businesses to one another. The ability to view all ownership entities and search for previously or currently owned businesses has saved Jet from providing surety to known bad actors.

Jet has coupled OpenCorporates tools with other advanced procedures to counter deceptive applications. Over time Jet has seen a drop in losses and has not fallen victim to fraudulent schemes since implementing these changes. If an applicant passes the stringent Jet underwriting now in place they can receive a lowered rate, which gives Jet a strong competitive advantage. Over time the hope is that all surety carriers can develop procedures to safeguard the freight industry from certain types of fraud.

Onto the next challenge

Jet’s next problem to tackle is notification of midterm ownership changes. Rates are offered based on risk specific to the principal who owns the business. If this ownership changes after the bond is purchased, the risk associated with the surety bond could change depending on who the ownership is transferred to.

If a known scammer purchases a clean business, even if done correctly with proper regulatory filings, there are no current alert indicators for insurance companies to track any change of ownership and an outsized risk has been laid upon unsuspecting freight carriers who expect the surety provider to have bonded honest actors in the freight broker profession.