2.2 Authorized (admitted) Vs Unauthorized (nonadmitted) Insures Flashcards
(10 cards)
Authorized (Admitted) vs. Unauthorized (Nonadmitted) Insurers
Insurance regulations are enforced at the state level. For insurance companies to conduct business legally in a particular state, they must be licensed or approved by that state’s insurance regulatory authority.
Authorized (Admitted) Insurers
These insurers are fully licensed and approved by the state’s Department of Insurance.
They comply with all regulations and have met state standards, including financial solvency requirements.
Customers buying insurance from these insurers receive the protections provided by state guaranty associations in case the insurer becomes insolvent.
Unauthorized (Nonadmitted) Insurers:
These insurers are not licensed by a specific state to transact business there.
They can still legally provide insurance coverage under certain circumstances (like coverage that isn’t typically available through regular admitted insurers).
Consumers may purchase insurance from these insurers through what’s known as Excess and Surplus Lines Insurance, when coverage isn’t available through admitted insurers.
Nonadmitted Surplus Lines Insurers Characteristics:
Provide coverage types typically not offered by standard insurers.
Usually cater to specialized or high-risk insurance coverage.
Often offer higher insurance limits compared to admitted insurers.
Important notes:
Consumers are permitted by law to obtain property and liability insurance from a nonadmitted insurer only if coverage isn’t available through an admitted insurer.
Nonadmitted insurers are still regulated. The state Department of Insurance maintains a list of authorized nonadmitted surplus lines insurers that are allowed to operate within the state.
In short, the main difference is that admitted insurers have official state licenses and meet all state regulatory requirements, while nonadmitted insurers are not licensed within the state and typically provide specialty, high-risk, or difficult-to-place coverage not offered by admitted insurers.
Domestic, foreign and alien insures
When used to describe insurance companies, the terms “foreign” and “alien refer to a company’s location, much as a person might be a foreigner or an alien, with respect to the country in which he or she is located
Insures are categorized based on?
Their headquarters location, or domicile
Domestic insures
And insurance companies headquarters is located in the state of incorporation. Innsures doing business in the state in which they are headquartered are classified as domestic insurers in that state
Foreign Insures
Any US company that does business in a state other than the one in which it is headquartered is classified as a foreign insurer in that state
Alien insures
An insurance company that is headquartered or incorporated in a country outside the United States, and doing business in the United States, is an alien insurer
