The Difference Between an Admitted and Non-Admitted Insurance Carrier

You may not have heard the terminology before, but insurance carriers fall into two categories: admitted and non-admitted. These terms are especially common in the world of commercial auto insurance, and it’s important to know the distinction to help you make appropriate coverage decisions.

Admitted Insurance Carriers

To become an admitted insurance carrier, a company must go through a lengthy process. If it meets all requirements, the carrier earns the approval of a state’s insurance department. This creates a situation in which:

The insurance company meets all state regulations for auto insurance.
The state will make payments on claims if necessary if the company fails.

When you’re a business owner, these qualifications are important. After all, you don’t have to worry about your policy falling short of state requirements, plus you’ll have coverage even if something sends the company into bankruptcy. You also won’t have to pay various fees and taxes, since the connection with the state helps cover them.

Non-Admitted Insurance Carriers

In contrast, non-admitted insurance carriers have not completed the process to become approved by the state. Instead, they are what are known as an “excess and surplus line carrier.” These companies:

Do not necessarily comply with the state’s insurance regulation
Provide no guarantee that claims will have a payout if the company faces bankruptcy
Do not allow policyholders to appeal to the state insurance department if they think there was an issue with the handling of their claim

Not-admitted insurance carriers do not have to follow the same strict forms and guidelines as admitted carriers. There is also no protection provided by the state in times of financial disarray or bankruptcy. This allows these companies to have great flexibility in policy types and risk coverages that may not be available with an admitted carrier.

Which One Is Better?

At first glance, admitted insurance carriers may seem like the best and only option. However, you can still receive great coverage with a non-admitted company. To find out the quality of service an insurance provider gives, research their letter grade rating. Either type of insurance company that scores above a C can still meet the needs of your company, regardless if it has state approval or not.

You shouldn’t use admitted/non-admitted status as your sole guideline for choosing a commercial fleet insurance company, but it’s important to be aware of the difference. It is easier to make appropriate decisions when making claims on your policy if you know into which category your insurance carrier falls.