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Admitted vs. non-admitted insurance companies
An admitted insurance company has met regulations set by a state’s department of insurance (DOI), whereas a non-admitted insurance company has not met those requirements.
What are admitted and non-admitted insurance companies?
An admitted insurance company is backed by the state, which means:
- The insurance company (also called carrier or provider) must comply with the regulations set by your state's department of insurance (DOI) or insurance commissioners.
- The state will verify that the carrier’s insurance policy forms, rates, and requirements adhere to state insurance laws and regulations before allowing it to sell in your state.
- If the admitted insurance company fails financially, the state will step in to make payments on claims as necessary.
A non-admitted insurance company isn’t approved by the state, which means:
- The insurance company does not necessarily comply with state insurance regulations.
- If the insurance company becomes insolvent, there is no guarantee that claims will be paid, even if the case is active at the time of bankruptcy or financial failure.
- If policyholders think their case was handled improperly, they can’t appeal to the state DOI.
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Are admitted or non-admitted insurers better for business owners?
There are situations when both admitted and non-admitted insurance coverage may be beneficial for business owners, depending on the types of insurance needed.
The benefits of admitted insurers
An admitted insurer, also called a standard market carrier, is an insurance company that has been approved by a state’s department of insurance.
For business owners, buying from admitted companies means three things:
- You don’t have to pay various fees and taxes when you purchase an insurance policy because the company’s status makes those expenses unnecessary.
- If the company fails for some reason (e.g., claims after a natural disaster deplete its reserve of funds), the state’s guarantee fund will step in and cover your claims.
- If you think your insurance agent or insurance company handled a claim improperly, you can appeal the decision to the state insurance department.
If the admitted insurance company fails financially, the state will step in to make payments on claims as necessary.
The benefits of non-admitted insurers
Non-admitted insurers, also known as excess and surplus (E&S) lines carriers, sell policies that aren’t backed by your state. While they don’t fall under traditional insurance regulations, many states do regulate non-admitted carriers.
These regulations are usually less strict than those followed by admitted insurers. As a result, non-admitted insurers have more flexibility when it comes to:
- Designing coverage
- Insuring risks
- Selling insurance policies
This typically means they can insure complicated specific risks that the standard insurance market won’t cover. For example, if you own a manufacturing business that has a facility located along the Gulf Coast, or in an area known for brush fires, it may be difficult to find an admitted insurer to cover property damage from a hurricane or wildfire, respectively.
Similarly, many contractors in New York have to obtain liability insurance policies through non-admitted insurance companies due to the high risk of construction-related lawsuits in the state.
In addition to admitted and non-admitted status, insurance companies are given letter grades from A++ to F, from best in class to worst. These grades are calculated by the credit rating firm A.M. Best, which has been rating insurance companies since 1906.
A non-admitted insurance company with a high grade is most likely a solid bet for your insurance needs, while an admitted carrier with a C rating or below could be risky.
Insureon works only with top-rated insurance companies to help business owners find the appropriate coverage at affordable rates.
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A certificate of insurance (COI) provides proof of insurance coverage. To acquire a COI, you must first buy a small business insurance policy.
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Updated: October 14, 2023
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