What is admitted insurance?

Admitted insurance is insurance written by an insurer licensed to conduct business in the jurisdiction where the insured exposure exists. It is governed by state insurance agencies that regulate an insurance provider's operations. Not only are these providers licensed by a state insurance agency, they also must adhere to requirements from the governing agency on capitalization, rate approvals, claims handling, and policy forms. Non-admitted providers do not face the same regulations, nor are they always mandated to adhere to state standards.

Admitted insurance provides unique benefits to policyholders. In cases where the admitted insurance company fails to make payments in accordance with state agency standards, the state might step in to make payments. Also, policyholders have recourse for addressing claims that have been mishandled. Claims are not guaranteed in the event of a non-admitted insurer’s insolvency, and policyholders have no recourse to a state’s insurance department if a non-admitted insurer improperly handles a claim.

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When do I need to be aware of admitted insurance?

When buying insurance, there are some benefits of partnering with an admitted insurance provider, including the extra protection that comes with the ability to follow a predetermined process for having a claim or issue resolved according to state standards. Further, entities that purchase admitted insurance might not have to pay certain fees or taxes that are part of a non-admitted insurance company's premiums. However, businesses that face risks the traditional market refuses to cover will benefit from purchasing a policy from a non-admitted insurer.

What is important to know about admitted insurance?

In addition to admitted insurance status, several factors determine the quality of an insurance company. Both admitted and non-admitted insurance providers are ranked according to letter grades (which range from A++ to F) that determine the risk level of working with that company. These letter grades are calculated and assigned by credit rating firms such as A.M. Best, Moody’s, Fitch, and Standard and Poor’s, which are Nationally Recognized Statistical Rating Organizations (NRSRO). A non-admitted insurer with a high rating may be a better choice for insuring a company than a riskier admitted carrier with a C rating.

There are some other important items you should know about admitted insurance:

Admitted insurance providers must follow strict state regulations and standards.
The state could step in and make payments on an admitted insurance company's behalf.
The policyholder could file an appeal in cases where insurance matters were mishandled.
An admitted insurance company's policy might prove to be a better deal.