Back to Agent ResourcesPart 1: The Method

Chad's 180: Bail Rebates Done Right Under Prop 103

Part 2: Why It Works

By Chad Conley, Chad Conley Bail Bonds

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I'm the guy who came out with Prop 103 rebates in bail, so hear me when I say this: I want to take it back.

I can't, of course. The voters passed it, and bail is included. So we're not going to lose Prop 103. But the way a lot of us are using it, we're losing anyway: losing money on the bonds we drop, and losing clients when we don't. Rebates were meant to give a good client a fair break, not to start a price war. So since we can't take it back, let's do it right. Here's how I think it should be done.

What a rebate was meant for

A Prop 103 rebate was never meant for everyone. It was meant for the client who earns it: real collateral, a strong cosigner, a light record, a case where the risk is lower than the bond. It gave us a way to show we're competitive and that we care, that we'll go looking for the needle in the haystack to save a good client money. That made our whole industry look good.

Somewhere along the way it turned into the Wild West. Too often, what a family pays now depends on whether they know to haggle. The family that doesn't know pays full price. The one that calls around gets a deal that leaves the agent short. Neither one is fair. The same facts should get the same offer, written down, every time.

One bond, one fact most agents miss

Below the 7% category, the surety and build-up fund stop going down. Every point you drop comes straight out of your pocket.

One $100,000 bond:

*Before agent pay and overhead.

Going from 7% to 5% costs you $2,000 on that one bond, and the surety still takes the same $1,400.

Example 1: $30,000 bonds

Say 100 people call you this month about $30,000 bonds. About 30 of them have been offered 5% somewhere else. In my shop, I lose about 30% of my clients to deals like 5%, $300 down and $100 a week.

*Before agent pay and overhead.

If you hold your price and don't drop to match the 5% deal, you lose about $47,000. That's the money from the 30 bonds you didn't get to write, because those clients went to the agent who dropped.

If you drop to 5% to match the other agent, you lose about $15,000. You keep the 30 clients and write the bonds, but you collect less on each one, while the surety and build-up fund still take the same amount.

Both of those losses are compared with the third line, where there is no haggle and each client pays what their facts qualify for.

Either way, you lose.

Example 2: $100,000 bonds

Same 100 calls, same 30 shopping for 5%, but $100,000 bonds. That's still a bond we all write every week, not the $250,000-and-up bond where collateral and scrutiny change.

*Before agent pay and overhead.

If you hold your price and don't drop to match the 5% deal, you lose about $158,000, because those 30 clients go to the agent who dropped.

If you drop to 5% to match the other agent, you lose about $50,000, because you write the same 30 bonds for less money, and the surety still takes the same $1,400 on each one.

Same story, just bigger. Haggling makes us lose either the bond or the margin. Same facts, same offer stops both.

I'm not saying don't compete. Compete hard, on service, on speed, and on price too. Just do it within the rules: your own filed rates, and the same offer for the same facts.

If you pay your agents a percentage, both numbers shrink a little, but you still lose either way. Your agent's cut comes off a smaller premium, and the surety's share doesn't move.

And that's before anyone's late

We all know clients fall behind on payments. Take the $30,000 bond at 5% with $300 down and $100 a week. The $300 doesn't even cover the $420 owed to the surety and build-up fund. If the client pays four weeks and stops, the agent has $700 in hand. After the $420, that's $280 for the whole bond, the risk and the chasing.

A haggled net price gives you nothing to fall back on. A rebate done right does. I think a rebate should be written against the filed rate, and the client should keep it by paying on time. If they fall too far behind, the rebate can come off. It doesn't have to be used often. But when one of my clients went six months without a payment, that's what got me paid.

How I think it should be done

1. Quote the bottom line first. The family has someone in jail. Tell them what it costs, what's due now and what's due each month. Don't make them sit through a speech about rebates.
2. Price by the facts, not the haggle. Collateral, cosigner, record, case. Ask the questions, and give the rate those facts earn.
3. Same facts, same offer. If you give your best price to one client, give it to every client who qualifies on the same facts.
4. Write it down. Put the filed rate, the rebate and the reason on the paperwork, and in the client's file with their signature.
5. Apply your terms the same way. If late payments can cost the rebate, apply that rule the same way for everyone, and note it in the file each time.

The full method, with three sample clients and the receipt, is in Part 1 of Chad's 180.

How these numbers were built

These are illustrations, not anyone's real books. Plug in your own.

• The bonds: 100 calls of the same size, $30,000 or $100,000.
• Today's mix: 20 at 10%, 30 at 8%, 20 at 7%, and 30 dropped to 5%.
• Same facts, same offer: the same 70 clients pay the same. The 30 who were dropped get the rate they qualify for: about two-thirds at 7% and one-third at 6%, for the best clients.
• Surety and build-up fund: about 20% of the category premium, never below the 7% category. That's my own arrangement and a common one in California.
• What's not counted: agent pay, overhead, forfeitures and collections.

Where I stand, and what I'm asking

There's very little written law on how a bail rebate should be set up. Prop 103 says we can rebate. The Department of Insurance says we can. Beyond that, nobody has laid out what doing it right looks like. So I'm putting my position out there, the way an attorney puts out an opinion: this is my understanding, and this is how I think it should be done.

If we're all going to stand behind what's fair, we first have to say what fair is. That's what I'm trying to do here.

This isn't a fight with anyone in our industry. It's a fight for our industry. When we do rebates fairly and by the law, we serve our communities better, we stay strong, and we give voters one more reason to stand with us. That's how we kept 56% of them in 2020, and it's how we earn more. If we can't say clearly among ourselves what's right and what's wrong, we can't defend it to anyone else. Getting this right is part of fighting for bail.

If you have well-thought-out input, I want it. That could be a law, a ruling or an experience that shows I've got something wrong, or an idea that makes this stronger. I'm not looking to argue or take sides. I'm looking for what's fair, and for how we all get behind it.

If this makes sense to you, email me and tell me you're in on doing rebates the right way. Please don't send me your prices. I don't want them, and this isn't about anyone's prices.

Chad Conley Chad Conley Bail Bonds [email protected]