Admitted vs. Non-Admitted
Depending on your business, you may be with an admitted or non-admitted insurance carrier. Hold judgment when it comes to non-admitted insurance carriers. When referred to as non-admitted, the carrier sounds sub-standard – this is not the case. To understand the difference between carriers, we must understand what separates an admitted and non-admitted carrier.
Admitted insurance carriers are protected from insolvency by the state meaning the state is financially responsible for claims and policies. With the oversight of the state, admitted insurance carriers identify target industries and develop specific policies for the targeted industry. Often, these policies include additional coverages designed to meet the needs of the industry.
• Class-specific and thorough
• Financial – state-protected
• Rigid underwriting
• Tenured
Non-admitted insurance carriers, often referred to as surplus lines, are not backed by the state in case of insolvency. However, in order to transact in business in the state, non-admitted carriers must adhere to state guidelines and hold in reserves (financial) amounts commensurate to the underwritten business. These reserves are prohibited from use but to secure the business. The appetite for non-admitted carriers is based more on acceptable risk. The coverages in the policy provide risk protection, and additional coverages can be provided based on underwriting approval.
• Broad coverage
• Financial reserves
• Flexible
• Negotiable
Due to the financial responsibility that states undertake with the admitted carriers, the states demand that these carriers adhere to certain risk requirements. By doing so, these admitted carriers become risk-averse; thus, the underwriting appetite may be limited.
Please note: You will be notified that coverage is provided by a non-admitted carrier at binding because you must acknowledge in writing on a D1 form provided by your agent. Furthermore, your agent is required to sign an affidavit that three admitted carriers were approached about the business. This affidavit requires the agent to provide the name of these carriers and the reason for the declination.
This is not an article arguing that your business should be with a non-admitted carrier. Northgate hopes that by understanding the difference you may take comfort in knowing that the best carrier is providing your coverage.