Admitted insurers normally write lawyers and accountants professional liability insurance policies. Admitted insurers may refuse certain firms with specialized practice areas, firm makeup or claims/disciplinary activity. When that happens a non-admitted insurer (Surplus Lines Insurer) can provide professional liability insurance coverage.
Admitted carriers participate in each state’s insurance guarantee fund in case of a financial default. Non-admitted insurers do not participate in the state guarantee funds. With a default by a non-admitted insurer the insured claim payments after a default may be a problem.
Admitted carriers file their rates and forms with each state insurance department, non-admitted carriers do not have this requirement. When using a surplus lines insurer check the state’s “Whitelist.” The state “approved” insurers on the “Whitelist” must meet that state’s financial requirements. Your state insurance department do not regulate surplus lines insurers. Surplus lines insurers can charge for individual risk exposures where an admitted carrier must follow its filed rates and forms. This gives a surplus lines insurer the ability to cover more diverse unique risks. In the event of a dispute your insurance department may not be much help with a surplus lines insurer.
Admitted carriers pay their premium taxes directly to the state and normally includes taxes in the premium listed on the declarations page. With surplus lines insurers, a surplus lines agent as the responsibility to collect and report surplus lines taxes and fees. Surplus lines policies list taxes and fees separately. The surplus lines agent remits the premiums taxes to the state.
Surplus Lines carriers may have AM Best higher ratings admitted carriers. States have more stringent financial capital requirements for surplus lines insurers versus an admitted insurer. An admitted insurer may have surplus lines affiliates for placing risks that are outside of their admitted carriers program.
So having your professional liability insurance policy placed with a non-admitted carrier is not a bad thing. But it requires extra due diligence into the insurer’s financial strength and reputation.
Contact Me Today
Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
Lee@L2Ins.com
616-726-7080
