Admitted vs. non-admitted insurance carriers
What's an admitted carrier?
An “admitted carrier” in California is an insurance company that has been filed and approved by the California Department of Insurance (DOI). This means they are subject to all state regulations, and cannot deviate from their filed rates.
For you, the insured, an “admitted carrier” means:
- When purchasing a policy, you don’t have to pay certain fees and taxes because the company’s status makes those expenses unnecessary.
- If the company fails financially for whatever reason (i.e. large claims wipe out company’s reserve of funds), the state will step in and take care of your payments.
- If you think your insurance company has treated you unfairly (i.e. cancelled your policy or handled your claim improperly), you can appeal the decision to the state insurance department.
What's a non-admitted carrier?
A “non-admitted carrier” in California is an insurance company that has not been approved by the CA DOI. They can also be known as excess or surplus lines. This means they are not obligated to comply with any state insurance regulations. Consequently, they are able to insure higher-risk events that admitted carriers often can’t afford to cover.
For you, a “non-admitted carrier” means:
- You will have to pay a “surplus lines tax” and “stamping fee” on your policy (which usually totals to around 4% of the policy premium or less), and sometimes an inspection fee.
- If the insurance company becomes financially insolvent, there is no guarantee your claims will be paid.
- If you think your case was handled improperly, you cannot appeal to the state insurance department.
Which one is better?
Admitted carriers sound more reliable on paper, right? But it’s important to remember that admitted carriers have rigid rules they must abide by, and aren’t able to cover every type of business we see. There is a purpose and place for non-admitted carriers and there's a reason they exist.
Non-admitted carriers can sometimes have more flexibility with both policy terms and pricing, which is good for both the company and the policyholder.
A.M. Best Company’s ratings (which work like letter grades, from A++ to F) can help you find out how financially solvent a company is. For instance, you'll probably want a non-admitted company with an A+ rating rather than an admitted carrier with a C rating.