The primary difference between an admitted carrier and a non-admitted carrier is that an admitted insurance carrier is approved by the state’s insurance department, whereas a non-admitted insurance carrier has not been approved and therefore does not have state backing. 

What is an Admitted Insurance Carrier? 

An admitted insurance carrier, also known as a standard market carrier, has been approved by the state’s insurance department, which has several important implications: 

• The insurance carrier must comply with all regulations set forth by that state’s department of insurance. 
• The state is backing the insurance carrier, meaning that if the carrier suffers a financial failure (if it is declared insolvent and must be liquidated), the state guarantees that it will cover claims on admitted insurance products on behalf of the insurance carrier as needed, up to the state’s specified limit.  
• Claimants who feel that an admitted insurance carrier handled their claim improperly can file an appeal with the state’s department of insurance. 
• Consumers who purchase admitted insurance products do not have to pay certain taxes and fees on their policies.

What’s the Process to Become an Admitted Carrier? 

To become an admitted carrier, the insurance company must file an application and become licensed with the state insurance commissioner in each state. To be approved as an admitted carrier, the insurance company must follow all regulatory requirements for insurance in that state, including filing and receiving approval for all its forms and rates and the handling of claims. 

Admitted insurance carriers are required to pay a portion of their revenue to the state’s insurance guaranty association, which then serves to pay claims should the carrier become insolvent. 

What is a Non-Admitted Insurance Carrier? 

A non-admitted insurance carrier has not been licensed and is not regulated by the state’s department of insurance. Instead, these carriers, also known as excess and surplus insurance carriers or surplus lines insurance carriers, are regulated by the state’s surplus lines office, although the regulations are less stringent. There are several things that distinguish non-admitted carriers from admitted carriers: 

• Typically, non-admitted carriers are not permitted to write policies that are available on the admitted insurance market, although they can offer unique insurance products that cover specific risks and other coverages that admitted insurance carriers typically do not offer. 
• Non-admitted carriers don’t have to follow the rates established by the state, so they often offer more flexible pricing compared to admitted carriers. 
• Policyholders can’t appeal to the state if they feel a claim has been mishandled by a non-admitted carrier, as these carriers aren’t backed by the state. That also means that if a non-admitted carrier becomes insolvent, the state won’t step in to pay policyholders’ claims. 

Important Considerations in Choosing Between Admitted Cyber Insurance Carriers and Non-Admitted Cyber Insurance Carriers

There are several important considerations for companies to weigh when purchasing cyber insurance and deciding between admitted carriers and non-admitted carriers. First, it’s important to understand that the “admitted” designation is an administrative designation rather than an indicator of the quality or stability of an insurance carrier or its products. Insurance agents and brokers must be appropriately licensed to sell both admitted and non-admitted insurance products. 

Some insurance carriers offer both admitted and non-admitted insurance products; for instance, in the U.S., an insurance carrier may have an admitted designation in one or a few states, which allows them to offer non-admitted insurance products in other states. If you’re looking into a particular cyber insurance carrier, checking into their state licensing status is one of the first things you should do. Here are a few other considerations for choosing between admitted and non-admitted cyber insurance carriers: 

• The most important consideration is to choose proper coverage based on your company’s risks. For example, if you require coverage for unique risks not offered in the admitted insurance market, non-admitted insurance is the only way to obtain coverage. 
• Both admitted and non-admitted cyber insurance carriers have ratings. Ratings issued by AM Best are based on letter grades ranging from A++ to F and indicate a carrier’s ability to repay debts, its financial strength, and other criteria. Insurers with high ratings are generally safer options, as a high rating indicates that the company has a solid financial standing and is able to meet its obligations. 
• A non-admitted cyber insurance policy may be an option if you’ve been rejected for coverage in the admitted insurance market, such as if you require coverage limits higher than what is offered in the admitted market. 
• Choosing an admitted cyber insurance carrier means you won’t have to pay certain licenses and fees that you’d have to pay for non-admitted cyber insurance policies. However, because non-admitted cyber insurance carriers aren’t bound by the rates set by the state, they have more flexibility and may be able to offer more attractive pricing.
• If you purchase non-admitted cyber insurance, your company or insurance broker must provide documentation to indicate that you made a good-faith effort to purchase insurance from an admitted carrier. That doesn’t mean you have to settle for inferior coverage; it’s perfectly acceptable to purchase non-admitted cyber insurance if you can’t purchase comparable cyber insurance coverage on the admitted market. 

There’s no single right answer for every business when it comes to choosing between admitted cyber insurance carriers and non-admitted cyber insurance carriers. There are pros and cons to both admitted insurance carriers and non-admitted carriers, so companies should weigh their risks and coverage requirements against the available cyber insurance products in the market to find the best coverage for their needs.