If you’ve received quotes for commercial insurance, you may have heard your agent use the terms “admitted” and “non-admitted.”
And if someone tells you that one of your quotes is from a non-admitted carrier, your first reaction might be:
Is that bad?
Not necessarily.
Admitted and non-admitted insurance markets serve different purposes. Depending on your business, property, industry, loss history, or the type of coverage you need, either market could make sense.
The important part is understanding the difference and having access to both.
What Is an Admitted Insurance Carrier?
An admitted insurance carrier is licensed by the state to sell insurance within that state.
Because it is admitted, the carrier’s rates, policy forms, and business practices are subject to requirements established by the state’s insurance regulators.
One important distinction is that eligible policies written by admitted carriers generally have access to the state’s insurance guaranty association if the insurance company becomes insolvent. The amount and type of protection varies by state and is subject to limitations.
For many businesses with relatively standard exposures, the admitted market can be a great place to obtain coverage.
But not every risk fits neatly into the standard market.
That’s where the non-admitted market comes in.
What Is Non-Admitted Insurance?
Non-admitted insurance . . . often called surplus lines or excess and surplus (E&S) insurance is designed to provide coverage for risks that may be difficult to place in the traditional admitted market.
The word non-admitted can sound alarming if you’ve never encountered it before.
It doesn’t mean the insurance is illegitimate.
Instead, it means the insurance company isn’t licensed as an admitted carrier in that particular state. Surplus lines transactions are still regulated, and coverage is generally placed through appropriately licensed insurance professionals.
The E&S market exists in large part because some risks don’t fit the underwriting guidelines or policy structures available through standard carriers.
Why Would a Business Need the Non-Admitted Market?
Imagine trying to fit every business in America into the same underwriting box.
It wouldn’t work.
A standard office building and a vacant property undergoing a major renovation don’t present the same risks.
Neither do a traditional retail store and a pet boarding facility responsible for dozens of animals every day.
Businesses and properties can become harder to place because of factors such as:
• Unique or specialized operations
• Property condition, age, occupancy, or location
• Vacant properties or buildings under renovation
• Higher-risk business activities
• Prior claims
• Coverage limits that exceed standard-market appetite
• New or emerging risks
• Specialized coverage requirements
When an admitted carrier can’t—or simply doesn’t want to—write a particular risk, the E&S market can provide another option.
Why Are Non-Admitted Carriers More Flexible?
One of the biggest advantages of the non-admitted market is flexibility.
Admitted carriers generally must file their rates and policy forms with state regulators. Non-admitted carriers have greater freedom in designing policy forms, establishing pricing, and determining what types of risks they’re willing to insure.
That flexibility can allow an E&S carrier to say yes to something a standard carrier won’t consider.
But flexibility also makes it especially important to understand exactly what you’re buying.
Policy language, exclusions, deductibles, valuation provisions, minimum earned premiums, cancellation provisions, and other terms can vary significantly.
The premium is only one part of the decision.
What About the State Guaranty Fund?
This is one of the most important differences between the two markets.
Eligible policies from admitted insurance carriers generally have some protection through the state’s insurance guaranty association if the carrier becomes insolvent, subject to the applicable state’s eligibility requirements and limits.
Non-admitted policies generally do not have that guaranty fund protection.
That doesn’t automatically mean a non-admitted carrier is financially weak.
Many E&S insurers are large, established insurance companies. But because you don’t have the same guaranty-fund protection, the financial strength of the carrier is one of the factors that should be considered when evaluating coverage.
So, Is Admitted Insurance Better?
Not necessarily.
And non-admitted isn’t automatically better either.
The better question is:
Which market makes the most sense for your particular risk?
For one business, an admitted carrier may provide excellent coverage at a competitive price.
For another, an E&S carrier may offer coverage that is broader, more flexible, or simply unavailable through the admitted market.
Sometimes the differences become even more apparent when your circumstances change.
A real estate investor, for example, might have different insurance needs while a property is vacant and undergoing renovations than after the renovation is complete and a tenant moves in.
The market that makes sense today isn’t necessarily the market that will make sense during the next phase of the property.
This Is Where Having Options Matters
At Clear View Insurance Specialists, we’re an independent insurance agency.
That distinction matters.
Rather than assuming your insurance needs to fit into one specific program or one type of market, we can evaluate options from both the admitted market and the non-admitted/E&S market, depending on your individual risk and the markets available to us.
Our goal isn’t simply to find a quote.
It’s to understand what you’re trying to protect, identify the options available, and help you understand the differences between them.
Because sometimes the right answer is an admitted carrier.
Sometimes it’s an E&S carrier.
And sometimes the real value is having someone who understands when to look at each.
Have questions about your insurance options?
If you’ve been told your business or property needs to be placed in the non-admitted market . . . or you’re wondering whether there are other options available. . . we’d be happy to take a look.
Talk with Clear View Insurance Specialists about your coverage options.
Coverage availability, terms, conditions, eligibility, and guaranty association protections vary by carrier, policy, and state. This article is for general informational purposes and is not a substitute for reviewing the terms and conditions of a specific insurance policy.
