Admitted and Non-Admitted Insurance Companies
Admitted Insurance Companies:
The state’s Department of Insurance has granted a license to an admitted or standard insurance company, allowing it to write specific types of insurance. A variety of illegal and unethical practices, including fraud, are prohibited by rate and form regulations, financial examinations, and strict regulation of these companies. A state guaranty fund is in place to cover losses incurred by insurance carriers that become insolvent or unable to pay policyholder losses.
The National Association of Insurance Commissioners (NAIC) requires admitted insurance companies to comply with state insurance regulations. A company may be forced to make claims payments by the state if they fail to do so. However, non-admitted insurance carriers lack such back-up protection mechanisms. If a customer purchases coverage from an admitted carrier, certain fees and taxes aren’t charged. In addition, if policies are handled incorrectly, admitted insurance policyholders have the right to appeal to their state insurance department.
Non-admitted Insurance Companies (Excess & Surplus Lines):
Non-admitted or non-standard insurance companies, on the other hand, are not directly regulated by the state insurance department. Insurers who sell Excess & Surplus (E&S) Lines are not required to be licensed by the state and can do business as “non-admitted” companies. Companies that provide E&S are financially stable and are regulated in other ways. The majority of states require E&S insurers to submit financial information, articles of incorporation, and lists of officers. The policyholders cannot be protected by the state guaranty fund, and they may pay higher taxes. In addition, they are unable to write insurance that is typically available in the admitted market.
A surplus lines policy can only be written if it has been rejected by admitted insurers and the agent placing it has a surplus lines license.It is not necessary for excess and surplus line insurers to follow most of the rate and form regulations imposed on standard market companies, so they can adjust their coverage and rate without being hampered by time constraints and financial costs. The policyholder and the company both benefit from this.