Admitted vs. Non-Admitted Insurance Carriers
By Nick Gallo—
Insurance agents can offer their clients products written by admitted or non-admitted insurance carriers. Both options are effective, but choosing to sell policies from one or the other significantly impacts the risks you can cover.
Understanding the differences between the two types of insurance carriers will help you find the best policies for your clients. Let’s explore what sets them apart, the benefits of working with each, and when you should choose one over the other.
What’s the Difference Between Admitted and Non-Admitted Insurance Carriers?
The primary difference between admitted and non-admitted insurance carriers is that admitted companies are licensed in the states where they provide coverage. In contrast, domestic non-admitted insurers only maintain licenses in the states where they’re domiciled.
Alien non-admitted carriers domiciled in other countries don’t have to hold any state licenses, but they’re subject to oversight from the National Association of Insurance Commissioners (NAIC), International Insurers Department, and Surplus Lines Working Group.
These differences in governance affect the products each type of carrier can create. Admitted carriers must write insurance products that follow strict form and rate regulations from their state’s department of insurance (DOI). Otherwise, they could lose their licenses.
Conversely, non-admitted carriers are free from both restrictions. Without form regulations, they can write non-admitted policies that cover atypical dangers and higher risk levels. Meanwhile, no rate limitations let them charge higher premiums to match their elevated exposure.
For example, a tax preparer needs a cyber liability policy with an aggregate coverage limit of $3 million, but admitted carriers won’t offer them more than $2 million. As a result, their agent turns to non-admitted carriers to meet their client’s needs.
The Benefits of Admitted Insurers
One of the primary benefits of insurance products from admitted carriers is that they’re state-guaranteed. As a result, your clients don’t have to worry as much about their insurers' financial stability.
Government insurance regulations require admitted carriers to pay a portion of each product’s proceeds into a state fund. If an admitted insurer ever becomes insolvent, their state’s DOI will step in and use those funds to pay outstanding claims.
Another notable advantage of policies from admitted insurers is that they’re usually less expensive than excess and surplus (E&S) coverage from non-admitted carriers. E&S policies typically have higher premium rates to compensate for their increased risk coverage.
Finally, clients may prefer admitted insurers because it’s easier to appeal their decisions. If one dislikes how an admitted insurer handles their claim, they can contact the state’s DOI for objective input.
The Benefits of Non-Admitted Insurers
The primary benefit to working with non-admitted insurers is that their products aren’t subject to form or rate regulations. As a result, they’re free to write policies that cover atypical or excessive risks and charge appropriate premium rates for their elevated exposure.
That flexibility is essential for businesses operating in dangerous or unusual industries. They often struggle to find policies that meet their needs within the standard market. If not for non-admitted insurers, they might not obtain coverage.
Your clients may worry that policies from non-admitted carriers are inherently riskier, but that’s a common misconception. In reality, non-admitted carriers are just as financially stable as their admitted counterparts.
A carrier’s solvency has nothing to do with its status as admitted or non-admitted. To determine which insurance companies are most reliable, agents should stay informed using reports from credit rating agencies like A.M. Best.
Choosing Between Admitted and Non-Admitted Carriers for Your Clients
Working exclusively with either admitted or non-admitted carriers inhibits your ability to serve your clients. Instead, agents are generally best off using both admitted and non-admitted markets.
Using that approach, your clients with ordinary risks get state-guaranteed coverage that meets their needs for the lowest possible price. Meanwhile, your clients with hard-to-place risks may pay a little more, but they still get the appropriate coverage from financially stable carriers.
Fortunately, non-admitted carriers specifically design insurance products to match the risks the standard market won’t cover. As a result, their offerings include general liability, professional liability, property, and cyber insurance policies that allow for additional risks or higher levels.
For example, a client wants property coverage for a commercial building. Unfortunately, it’s in an area with high earthquake risk. Admitted carriers can’t create products that adequately insure the danger without losing their license or risking insolvency.
However, non-admitted carriers are free from form and rate regulations. They can write property insurance policies with language that specifically covers the earthquake risk and raise premiums appropriately to avoid threatening their solvency. Therefore, the agent turns to non-admitted carriers to get their client the right property coverage.
What Are Examples of Non-Admitted Carriers?
Agents may soon see an increasing number of carriers expanding into the non-admitted market, as it’s already one of the fastest-growing insurance sectors in the United States. In 2021, total premiums from non-admitted carriers went up by 22%, reaching roughly $51 billion.
Here’s a short list of non-admitted carriers:
- Crum & Forster
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