In this post, we’ll describe the specifics of admitted carriers and non-admitted carriers and important differences between the two. We’ll also discuss some important considerations when choosing between admitted cyber insurance carriers and non-admitted cyber insurance carriers for your business.
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.
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:
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.
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:
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:
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.