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We are frequently asked what the difference is between an admitted and non-admitted insurance company. Related follow-up questions will often include: Is there a premium savings? Should I be concerned about coverage terms and conditions? Are there tax implications for my business?
The reality is that both admitted and non-admitted insurance companies can underwrite and place coverage. The admitted insurance company has been approved by a state’s insurance department and must comply with all state regulations regarding insurance. Should the insurance company fail financially, the state will step in to make payments on claims as necessary.
Alternatively, the non-admitted insurance company has not been approved by the state’s insurance department and, as such, if the company fails financially or becomes insolvent, there is no guarantee that your claim will be paid. Obviously, this can be problematic. Even if your claim is active and pending settlement when the non-admitted insurer becomes insolvent, there is a risk that the claim will not get paid.
When deciding to select an admitted insurance company option versus a non-admitted option, there are many factors to consider in addition to the state’s guarantee fund. These considerations include the insurance company’s financial strength, coverage terms being proposed, and the overall cost of the insurance premiums.
It is important that you are educated on the pros and cons of non-admitted options before placing coverage with that market. If you want to learn more about admitted versus non-admitted insurance options for your organization, consider an independent risk management consulting firm like The ALS Group to offer objective guidance in determining the best option to meet your business objectives.
Click here to request more information about The ALS Group or to learn more about admitted versus non-admitted insurance carriers and the implications for your business.