Admitted Insurance Defined

Understanding Admitted Insurance

Admitted insurance companies must rigorously comply with state insurance regulations established by the National Association of Insurance Commissioners (NAIC). In the event that they fail to do so, the state may intervene in making claims payments on a company's behalf. On the other hand, with non-admitted insurance carriers, there are no such back-up protection mechanisms in place.

Purchasing coverage from an admitted carrier means customers don't have to pay certain fees and taxes as part of those policies. Furthermore, admitted insurance policyholders have an embedded right to appeal to the state insurance department, in instances where policies were handled incorrectly.

What Non-Admitted Insurance Means

“Non-admitted” status means an insurance carrier has not been approved by the state’s insurance department, resulting in the following consequences:

Many states allow non-admitted carriers to conduct business only in cases where such companies fill a need that admitted carriers are not equipped to handle. But this comes at a cost. Namely, because non-admitted carriers are not state-regulated, they do not contribute funds to the state guaranty fund, which protects policyholders from the potential bankruptcy of an insurance carrier. For this reason, businesses that contract with non-admitted insurers must alert policyholders to this fact. Furthermore, insurance brokers must provide statements confirming that they made good faith efforts to obtain insurance from admitted carriers before choosing a non-admitted carrier.

Non-admitted carriers are usually referred to as "surplus lines" or "excess lines insurers." 

Purchasing insurance from a non-admitted carrier may seem riskier, but non-admitted status is just one way to gauge financial reliability. Case in point: insurance companies also receive letter grades ranging from A++ to F. These grades are calculated by credit rating firm A.M. Best, which has been evaluating insurance companies since 1906. A non-admitted insurance company with a high rating is most likely a safe bet, while an admitted carrier with a C rating or below suggests a higher risk level.