Admitted vs. Non-Admitted Carriers: What’s the Difference?
When exploring insurance options, you may come across the terms “admitted” and “non-admitted” insurers. These refer to the regulatory framework an insurance company operates under, which can impact your coverage, costs, and claims experience. Understanding the distinction is key to making an informed decision.
In this article we’ll cover:
What is an admitted carrier?
An admitted carrier in California is an insurance company that has been approved by the California Department of Insurance (CDI). These carriers must comply with state regulations, including pricing restrictions and consumer protection measures.
For policyholders, this means:
No additional fees: Admitted carriers don’t charge surplus line taxes or certain fees, which can help lower your overall premium.
State-backed protection: If an admitted insurer goes bankrupt or becomes insolvent, the state will step in to ensure claims are paid.
Regulatory recourse: If you have an issue with your policy—whether it’s an unfair cancellation or a claims dispute—you have the right to appeal to the state’s insurance department.
A non-admitted carrier (also known as an “excess” or “surplus lines” insurer) operates without state approval. While they don’t have to follow state-specific insurance regulations, they offer coverage for higher-risk situations that admitted carriers cannot afford to cover.
For policyholders, using a non-admitted carrier means:
Additional fees: You may need to pay a surplus lines tax and stamping fee, usually around 4% of the policy premium, along with potential inspection fees.
No state guarantee: If the non-admitted carrier becomes insolvent, there is no safety net to guarantee that your claims will be paid.
No regulatory appeal: If you’re unsatisfied with how your claim or policy is handled, you cannot appeal to the state insurance department for assistance.
At first glance, admitted carriers seem like the safer option. However, non-admitted carriers exist for a reason—they offer flexibility. Their ability to take on higher-risk policies or unique circumstances can be a big benefit, particularly for businesses with specialized insurance needs or homeowners who are unable to find insurance in the regular marketplace.
Ultimately, the decision should come down to the insurer’s financial strength and your specific coverage requirements. Ratings agencies like A.M. Best provide financial stability ratings for both admitted and non-admitted carriers, so it’s wise to check these before making your choice. In some cases, a highly rated non-admitted insurer (A+ or better) may be a better option than a lower-rated admitted carrier.