Since non-admitted insurance carriers do not have to operate under their state’s insurance laws, they don’t have the benefit of having the state in their corner in the event of insolvency. That also means that companies that purchase non-admitted policies do not have the protection of the state’s guaranty fund either, which might make non-admitted companies appear a bit riskier to deal with to some. Because of this, it’s not uncommon to see non-admitted insurance carriers having to pay higher taxes.
Another significant difference between the two lies in the types of insurance policies that each can offer. Non-admitted companies, generally, can’t write insurance policies that are available on the admitted market. Typically, the only way a non-admitted carrier can offer an insurance policy that’s present on the admitted market is if the policy has previously been rejected by three different admitted carriers.
What are the benefits of being a non-admitted carrier?
While non-admitted carrier can’t write policies that are on the admitted market, the good news is that they can write policies that cover unique and more specific risks that admitted insurers won’t touch.
Since they don’t have to adhere to the rates prescribed by the state, the pricing of their policies is a lot more flexible, which means that non-admitted companies can fill the gaps in risk that admitted carriers can’t or won’t insure.
For example, if your company needs to protect itself from high-risk events such as floods and earthquakes, admitted carriers might not be able to afford to cover such instances, while non-admitted carriers would. More about Workers Compensation Class Codes
Furthermore, since regulations are relaxed for non-admitted companies, getting covered, and changing your coverage if need be, often takes less time and doesn’t include the financial costs related to filing that an admitted insurer would have to charge.
Are non-admitted insurance companies legit?
The prefix “non” is often interpreted as a warning sign by some companies, but the truth is that non-admitted insurers are absolutely legitimate and financially stable companies. Non-admitted carriers need to have secure reinsurnace options or a massive monetary reserve in order to offer coverage for the high-risk events they often deal with, which they wouldn’t be able to do if they weren’t financially stable.
And as mentioned before, non-admitted agents all need to be licensed and even though they are not as regulated by the state as admitted carriers, there is still a significant amount of regulation involved in selling insurance as a non-admitted carrier as well.
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