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Common Insurance Terms – Admitted and Not Admitted Carriers

January 25, 2012

When an insurance policy is issued either an “Admitted” or “Non-Admitted” carrier can offer coverage.  It is easy to assume that non-admitted means substandard and unregulated.  This is not the case and there are some significant differences.

Admitted Carrier – An insurance company licensed by the State Department of Insurance to conduct business.  Companies are bound by rate and form regulations, and are strictly regulated. Admitted carriers are also required to financially contribute to the state guarantee fund which is used to pay for losses if a carrier becomes insolvent or unable to pay the losses. In general, admitted carriers:

      1. Must follow guidelines set forth by the Department of Insurance (DOI).
      2. File their rates and forms with the DOI.
      3. Partake in state insolvency guarantee association.
      4. Allow for DOI complaint review/remedy.

Non-Admitted Carrier – An insurance carrier not licensed by the state but is allowed to conduct business in that state. Non-admitted does not mean non-regulated — carriers are reviewed and approved by each state’s department of insurance.  Among the requirements, carriers must demonstrate financial stability; reputation and integrity; and, meet specific capital and surplus guidelines. In general, non-admitted carriers:

      1. Are not subject to a state’s rate regulations or insolvency guarantees.
      2. Require policyholders pay surplus lines taxes and fees.
      3. Provide flexibility that changes with market conditions.
      4. Offer customized coverage and pricing solutions.

Both admitted and non-admitted carriers offer benefits to policyholders and depending on the complexity of the organization there may only be one option.  It is important to understand that non-admitted carriers have been around since the 1800’s and generally are used when a risk is unusual, unusually large or when coverage is not available from licensed carriers.

Regardless of whether a carrier is admitted or non-admitted, make sure to review a carrier’s current “A.M. Best” rating before purchasing any policy.  A.M. Best is an independent organization for rating the financial strength of insurance companies. You can find ratings at www.ambest.com.

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