Florida is a particularly distinctive location for insurance. Many residential and commercial carriers opt not to offer coverage due to the risk of hurricanes and the expense of claims. As a result, brokers frequently place coverage in the unadmitted market. Non-admitted insurance (or surplus lines) carriers are not backed by the state and are not as strictly regulated as the admitted carriers, even though admitted companies are supported and governed by the state.

ADMITTED INSURANCE COMPANIES

An insurance company that is deemed “admitted” has been authorized by the state to operate as an insurance provider. To ensure compliance with regulations, such companies must submit all necessary documents including applications, policy forms, endorsements, and rates to the Office of Insurance Regulation (OIR) for thorough review and approval. By meeting these standards, these carriers are entitled to the support and protection of the Florida Insurance Guarantee Association (FIGA), a non-profit association under state management, that manages insurance provider insolvency and facilitates claim payments.

ADVANTAGES OF CHOOSING AN ADMITTED INSURANCE COMPANY OVER A NON-ADMITTED ONE

There are several reasons why selecting an admitted insurance company can be advantageous over a non-admitted one.

• Standardization of Coverage Form

To ensure uniformity across the industry, admitted policy forms often adhere to Insurance Services Office (ISO) standards that are utilized by many other carriers. However, admitted carriers still have the freedom to create their manuscript forms, which the state must approve. This ensures that policy wording is fair and not misleading to consumers.

• Rates Must Get State Approval

Rates offered by admitted insurers must be approved by the state’s Office of Insurance Regulation. This prevents sudden and drastic increases in insurance rates after a carrier pays out numerous claims, such as after hurricanes or water damage. The state’s OIR acts in the best interest of consumers by preventing unreasonable rate hikes.

• Fewer fees and no surplus lines taxes

Admitted insurance policies are subject to fewer fees compared to surplus lines policies. Surplus lines policies are subject to a 5% surplus lines tax, as well as broker fees, inspection fees, and other miscellaneous charges that may be required by surplus lines carriers and brokers. Admitted policies often exclude these fees, resulting in cost savings for consumers.

In summary, choosing an admitted insurance company provides several benefits, including stable and regulated rates, financial backing from FIGA, standardized policy forms, and lower fees.

• Florida Insurance Guaranty Association’s support (FIGA)

Admitted companies are backed by the Florida Insurance Guarantee Association (FIGA), a non-profit, state-based system that pays outstanding claims of insolvent insurance companies. FIGA provides coverage for homeowners’ claims up to $500k and condo or HOA claims up to the lesser of $100k per unit or policy limits. For other admitted claims, FIGA will pay out a maximum of $300k.

NON-ADMITTED INSURANCE COMPANIES

Non-admitted insurance companies function outside the regulatory framework of the state’s insurance laws, resulting in fewer regulations for their operations. Admitted companies are subject to review of their applications, policy forms, endorsements, and rates by the OIR, and are supported by FIGA. In contrast, non-admitted companies do not undergo such reviews or have FIGA’s backing. Nevertheless, these insurance carriers serve an essential function in the Florida insurance marketplace.

WHAT MAKES ME DECIDE TO BUY INSURANCE FROM A NON-ADMITTED INSURANCE COMPANY?

It’s important to note, however, that buying insurance from a non-admitted insurer does come with risks. These insurers are not regulated by the state insurance department, and there is no guarantee that they will be able to pay out claims in the event of a loss. Before purchasing insurance from a non-admitted insurer, it’s essential to do your research and make sure you understand the risks involved.

There are a few potential reasons why someone might choose to buy insurance from a non-admitted insurance company:

1. Specialized Coverage: Non-admitted insurance companies often offer coverage that is not available from admitted insurers, such as coverage for high-risk activities or unique business operations.
2. Cost: Non-admitted insurers may offer lower rates than admitted insurers because they are not subject to the same regulations and oversight.
3. Flexibility: Non-admitted insurers may be able to offer more flexible policy terms and conditions than admitted insurers, which can be appealing to some buyers.
4. Unique Risks: If you have a unique or high-risk situation, such as living in an area prone to natural disasters or owning a home with a history of flooding, a non-admitted insurer may be more willing to provide coverage.

Before purchasing insurance from a non-admitted insurer, it’s essential to do your research and make sure you understand the risks involved. Just keep in mind the following few points:

• Protection Against Greater Risk Events

Where admitted markets are unable to provide coverage, non-admitted insurance firms frequently do. These carriers frequently follow risk, whether they are providing wind coverage in Florida, earthquake coverage in California, or volcano coverage in Hawaii. They can charge greater premiums that are proportionate to the risk they are taking because their rates do not need to be approved by the state.

• Being able to provide coverage and coverage forms without state approval

These carriers frequently can issue endorsements for particular risks because state permission is not necessary for the issuance of forms. This gives them the flexibility and speed to market when new threats appear. These carriers are constantly looking for new methods to set themselves apart from the competition, whether through cyber liability coverage for a major retail chain, directors and officers coverage for an S&P 500 firm, or insurance on a sports athlete’s body part.

• Affordable Premiums

Non-admitted insurance markets can compete for the business they desire to have because their rates are not reported to the state. In contrast to approved carriers, the premiums are frequently negotiable.

• Carriers Ranked Top by AM

Almost all of the non-admitted carriers we operate with have ratings of A or higher from AM Best. AM Best is the most well-known insurance rating company; it was established in 1899. Carriers must regularly put their financials under stress testing to maintain their AM Best A rating. These ratings provide a reliable indicator of the ability of insurance firms to cover claims. In contrast to the majority of Florida carriers, the majority of AM Best carriers offer a wide range of business lines and have excellent global risk distribution.

A NON-ADMITTED INSURANCE COMPANY TO CHECK OUT

Non-admitted insurance companies operate outside of state insurance regulations and do not have the same consumer protections as admitted companies. It is important to carefully research and evaluate any insurance company you are considering and to only work with companies that are licensed and regulated by your state’s insurance department. Additionally, you may want to consult with a licensed insurance agent or broker for guidance and advice on selecting an insurance provider.

• Excellent Reinsurance or AM Best Rating

As previously stated, we usually advise considering non-admitted insurance carriers who have an A rating from AM Best or excellent reinsurance (insurance for insurance companies). You don’t want the carrier to recoup the claim money from you if they have a difficult year.

• Payment history for claims

Checking your carrier’s ability to pay claims is always a smart idea. Non-admitted insurance providers may elect to withhold payment when some admitted providers might not since they are less regulated.

• Longevity

Insurance that has been in operation for a while must be doing something well. Carriers that have been in business for a time often have a good understanding of what they are doing, whether it be delivering stable premiums or spreading their risks so they don’t have to pay out too much after horrible incidents.

• FORM FOR SURPLUS LINES DISCLOSURE

The insured may be asked to sign a surplus lines disclosure form, depending on the type of policy. This document certifies that, as the insured, you are aware that alternate sources of coverage may offer superior protection. It also confirms that the state guarantee funds are not a backup for the non-admitted insurance carriers. On the website of the Florida Surplus Lines Service Office, you can download a copy of the most recent Florida form.

As if choosing between insurance companies wasn’t difficult enough, the issue of whether a provider is admitted or non-admitted adds another layer of complexity. Both the admitted and non-admitted insurance markets providing coverage in the state of Florida are familiar to our representatives.