Insurance topics that everyone needs to know from someone who puts Jesus first, not money or himself--------------------------
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The Difference Between Admitted & Non-Admitted Insurance Companies
The difference between admitted and non-admitted insurance companies lies primarily in the regulations they must follow. These varying regulations result in business models that typically focus on different areas of the market. As a result, you may not be able to get a particular type of insurance from an admitted company that a non-admitted company offers, and vice versa. The status of a company as an admitted carrier isn't based on the financial solvency of the company, which is independently assessed by an outside source.
Admitted Insurance Companies
An admitted insurance company is one that is "admitted" by a particular state to do business as an insurance company. To be an admitted carrier, an insurance company must conform to the regulations of a particular state's Department of Insurance. In addition to meeting minimum regulations for admission, admitted carriers must also file their rates with the state, which the state must approve. One of the benefits of working with an admitted carrier is that the state has the responsibility to pay an insurer's claims, up to state-specified limits, in the event of the company's insolvency.
Non-Admitted Insurance Companies
A non-admitted insurance company is one that doesn't operate under an individual state's insurance laws. As a result, a non-admitted insurance company doesn't enjoy the benefit of having its claims resolved in the event of a bankruptcy. However, non-admitted companies also have much more pricing flexibility, as they don't have to submit their rates to the individual states for review. Consequently, non-admitted carriers can insure higher-risk events, such as earthquakes, or specialty risks, such as professional liability insurance, that admitted carriers often can't afford to cover.
While it can be a natural assumption that non-admitted carriers are riskier than admitted companies, that isn't always the case. Since non-admitted carriers have greater flexibility in pricing their premiums, they can set rates high enough to fund the additional risks they may take. The financial risk a company takes is reflected not by its status as admitted or non-admitted, but by its financial rating. The AM Best Company ratings agency assesses the risk of insurers and assigns letter grades for easy comparison, with the most solvent insurers garnering a grade of A++ or A+.
Restrictions and Limitations
Since non-admitted carriers have more latitude in setting their rates, insurance is often more expensive with non-admitted carriers than with admitted carriers. Non-admitted carriers also have more latitude in defining the restrictions in their policies, particularly regarding the coverage of pre-existing conditions, which may work against the consumer. Some residents of the U.S. who aren't citizens may not be able to purchase insurance from an admitted carrier and must instead seek out a policy from a non-admitted carrier.
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Michael Fillers, CPIA, NFIP Morris Insurance