Posted by: jmwilsonmga | July 3, 2012

Admitted and Non-Admitted Markets : What’s The Difference?

One of our most frequently asked questions is “What is the difference between admitted and non-admitted markets?”  To address this question, I interviewed Stacey Nelson, Personal Lines Manager, to get her expert explanation on this topic.

Here is Stacey’s synopsis!

Stacey Nelson, J.M. Wilson Personal Lines Manager

Non-admitted markets are typically spoken in the same breath as Excess and Surplus Lines.  These markets are specifically designed to cover those exposures seen as ‘outside of the box’ type risks.

These are markets that are able to create their own rates and forms to tailor policies to the needs of specific exposures, and give higher hazard operations and/or exposures a way to find coverage.

Admitted markets on the other hand, are seen as “standard line” companies that offer coverage to more cut and dry risks, and are supported by their state’s guaranty fund in the event of insolvency.

As non-admitted markets typically offer coverage outside of their domiciled state, they are not covered by the guarantee fund of the state in which they are writing coverage.  It therefore can become important to pay attention to the financial standings and ratings of these surplus markets to make sure they are consistently in good standing.

When working with a Managing General Agency (MGA) or Broker, you quite often have the peace of mind of knowing that these brokers monitor these ratings for you, and do not write with companies that fall below a desirable rating.  With J.M. Wilson, we will only work with companies that are rated A or better by A.M. Best.  A.M. Best is “the largest and longest-established company devoted to issuing in-depth reports and financial strength ratings about insurance organizations” (A.M. Best).  An A or better rating from A.M. Best means that the financial strength of the company is considered “Excellent” or “Superior”.

On a more visual level, there are some basic differences you will see between the declarations page of an admitted policy, and a non-admitted policy.  As non-admitted policies are written by out-of-state companies, you will typically see any applicable state specific surplus lines taxes and policy fees listed with the premium, whereas an admitted policy does not have taxes.  You will also see a notification in red on a non-admitted policy, making an insured aware that the insurance company writing the coverage is not licensed in that particular state, and therefore not covered by the guarantee fund in case of insolvency.

And lastly, you will generally note a minimum earned premium on a non-admitted policy, and not on an admitted policy.  This minimum earned premium essentially states that flat cancellations are generally not allowed, and a portion of the premium will be retained in the event of early cancellation.”

Thank you to Stacey for her expertise!  Please share any questions you may have regarding admitted and non-admitted markets in the comments.  We’d love to hear from you!

About The Interviewer : Kristin O’Leary, Project Coordinator

Kristin has been a proud member of the J.M. Wilson Marketing Team since 2005 and currently serves as the Project Coordinator.  She graduated from Western Michigan University with a Bachelor’s Degree in Marketing.  Outside of the office, she enjoys running, working with her family at their pet supply store, and spending time with her husband and their Miniature Schnauzer, Vinny.

Connect with Kristin on LinkedIn  Circle Kristin on Google+

Disclaimer :  This article is for informational purposes only.  There is no legal advice being suggested or proffered.  The author assumes no responsibility or liability for the actions taken or not taken by the readers based upon such information.  This article is the opinion of the author and is not supported or endorsed by J.M. Wilson.  It should not be relied upon and may contain inaccuracies or content may have changed over time, contact your underwriter for the most current and accurate information.  Any comments or responses are the opinions of their authors.  Content on this site is believed to be covered under Fair Use. Legal

Copyright 2012 J.M. Wilson Corporation

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