What is the difference between an Admitted and Non-admitted Insurance Carrier?
Sometimes business owners are hesitant when they see that the Insurance Terms being offered is from a Non-Admitted Carrier. Then they ask the question, what is a non-admitted carrier? In the Insurance realm there are Admitted and Non-Admitted Carriers. Even though the terms “admitted” have a more pleasing ring to it, does not mean that one is necessarily better than the other. There are both admitted and non-admitted carriers that are of high quality and have great financial stability. So, what is the difference? The main difference is that admitted carriers are backed by Insurance Guaranty Fund whereas non-admitted carriers are not.
To become an admitted carrier, an insurance company must file an application with each state’s insurance commissioner and be approved. Approval requires compliance with a state’s insurance requirements, including the filing and approval of that company’s forms and rates. Once a carrier is licensed to transact insurance business in a certain state, the carrier is required to pay a portion of its income into the state's insurance guaranty association. If an admitted company becomes insolvent, the state will help pay off policyholders’ claims. Since the carrier but gain approval on its form and rates, many admitted carriers write on ISO Forms which contain industry standard verbiage and coverages.
A non-admitted carrier is often referred to as an “excess and surplus line carrier” and operates in a state without going through the approval process required for admitted companies. Non-admitted carriers are not bound by specific forms or rates and therefore have much greater flexibility to write and design policies to cover unique and specific risks, and to adjust premiums accordingly. The Nightlife and Hospitality Industry is where you will see these carriers more often as insuring a Nightclub presents high risk, and each venue is unique with how it operates. The advantage that non-admitted carriers have is that they can manuscript their forms to sometimes fit a business better. Non-admitted insurance carriers are regulated by the state Surplus Lines offices but has less regulation than an admitted market. Each state charges taxes for non-admitted insurance, and agents must be licensed in surplus lines to sell non-admitted insurance.
The way I view Admitted vs Non-Admitted Carriers is like owning an Automatic vs a Manual car. They will both get you from point A to B and there is not one that is particularly better than the other. A manual car just allows you more control over when you want to shift and down shift gears.
KEL Insurance can place businesses with both carrier types. We offer the most comprehensive insurance solutions to help you safeguard your company. Our representatives provide great customer service as well as straightforward suggestions.