Understanding Admitted and Non-Admitted Insurance Carriers
Insurance costs are a significant expense category for most small and medium-sized businesses. When policy renewal time comes around, it is important for self-storage business owners to carefully consider the available insurance options presented by their insurance agents. One issue that brings up questions from many insurance consumers is the difference between admitted and non-admitted insurance carriers. A brief description of each type of carrier is outlined below.
Admitted carriers are backed by the state, which means that they must operate in compliance with rules and regulations established by the department of insurance in each state in which the company is admitted. If an admitted carrier suffers financial failure, the state will provide funds to make eligible claim payments. Policyholders may appeal to the state department of insurance with complaints and concerns about an admitted carrier's operations and claim handling. Admitted carriers are also referred to as "standard" or "approved" carriers, referring to their status with the state.
Non-admitted carriers are not insured by the state and do not have to comply with state insurance regulations. If a non-admitted carrier fails financially, there is no guarantee that claims will be paid, and policyholders have no ability to appeal to the state department of insurance. Non-admitted carriers may be referred to as "non-standard," "excess and surplus (E&S)," or "surplus lines" carriers.
This brief description should not be interpreted to mean that admitted carriers are always preferable over non-admitted carriers. Both types of carriers can be beneficial for businesses. As an example, self-storage businesses located in challenging geographic locations – the Gulf Coast, Tornado Alley, and areas at high risk of hail, wildfire, or severe wind and hail – may find it difficult to purchase property coverage from an admitted carrier. In these situations and many others, purchasing coverage from non-admitted carriers may be the most appropriate option.
Educated insurance consumers also should understand the importance of carrier financial ratings. A.M. Best evaluates the financial status of insurance carriers and assigns a letter grade from A++ to F. When considering purchasing an insurance policy, it is imperative to research the A.M. Best rating of the issuing carrier. For example, the well-known insurer Lloyds of London maintains non-admitted status and is ranked as one of the most financially stable insurance companies in the world.
When it comes to insuring your valuable business investment, your insurance agent is an excellent resource for researching insurance carriers and coverage options. Important information is also available from your state’s regulatory agencies. Educating yourself about insurance can help you make the most appropriate coverage choices.