Admitted vs Non-Admitted Carriers
Insurance is a highly regulated industry, with each state having its own Department of Insurance that works closely with insurance carriers and consumers alike. Carriers can write policies nationwide and they do this by either being an admitted carrier or by acting as a non-admitted carrier. As a consumer, it’s important to understand the distinction between the two as it does affect the type of policy and coverage that can be obtained. Here’s a breakdown of their key differences:
Admitted Carriers:
Admitted carriers are insurance companies that are licensed and regulated by the state’s insurance department where they operate. Carriers can be admitted in more than one State and must abide by each State’s rules and regulations. They must meet strict financial and regulatory requirements to obtain an Admitted Status. They pay state taxes and Fees annually to the State in a lump sum for all policies.
Some characteristics of Admitted Insurance Carriers include:
Regulation and Oversight: Admitted Carriers are subject to state regulations that govern their rates, forms (policies), and practices including how claims are handled. This oversight is designed to protect policyholders and ensure fair business practices.
Consumer Protections: Admitted carriers are covered by the State’s guaranty funds, which provide coverage in case the insurer becomes insolvent. This adds an extra layer of security for policyholders.
Financial Stability: In order to become Admitted carriers must demonstrate financial stability. They undergo regular financial reviews to assess their ability to pay claims and meet policyholder obligations.
Market Access: Admitted carriers have more presence in the market and can sell directly to consumers or through licensed agents and brokers. Admitted policies tend to have more robust, all-inclusive policies and coverage.
Preferential Priority: States require that admitted carriers get a first look at potential business. Agents must present quotes from admitted carriers before presenting non-admitted options. With 54% just in the last 12 months, add in the others that have been doing side hustles for years, and that equals to about 75-80% of Households with a side hustle as a second job. Side Hustles are the new small business. Some do it on a barter basis trading service for service and many donate time to their community.
Non-Admitted Carriers:
Non-Admitted carriers are also known as Excess and Surplus, or E&S carriers. They do not hold state-admitted licenses and therefore are not beholden to the same regulations that admitted carriers are. This allows them to provide coverage for risks that admitted carriers may not cover. Many high-risk businesses or homes are placed with non-admitted carriers.
Some characteristics of Non-Admitted carriers include:
Limited Regulation: By not being licensed by the State’s Department of Insurance, Non-Admitted carriers forego the regulations that Admitted carriers face. As such Non-Admitted carriers are not bound by state rate and form requirements. This allows them more flexibility in underwriting and pricing their policies appropriately.
Risk Coverage: Since Non-Admitted carriers have more freedom in their pricing and forms, they can cover high-risk or unique operations. They can provide coverage for risks that admitted carriers consider too risky or unconventional.
Financial Requirements: Non-admitted carriers are not beholden to the same financial requirements as admitted carriers, but that doesn’t mean they don’t have to demonstrate financial stability. All carriers are graded on their financial strength through rating companies and these grades can affect whether a carrier is accepted or rejected by other financial institutions.
Access through Brokers: Non-admitted carriers do not work directly with consumers and instead work with specially licensed brokers who have expertise in placing coverage for complex or unusual risks. As such policies written through Excess and Surplus carriers include taxes and fees per policy, but can also be tailored to fit policyholders’ specific needs.
Understanding the differences between admitted carriers and non-admitted carriers can help in deciding which carrier is best for your business’s needs. One is not necessarily better than the other, but they exist to provide for different and unique needs. It’s always best to work with a professional insurance broker to understand which type of policy would be most beneficial for your business.