I'm working on building an insurance company that will be selling a specialty insurance product. We are wondering what the benefits and risks are of selling the product as a non-admitted, rather than admitted product. The focus of the insurance coverage is mainly for property (think expensive sports gear in the $10's of thousands), with some personal injury and third party liability included as well.
Well if you went the admitted route you would likely have to consider 50 varieties of your offering; one for each state. If you went the non-admitted route you could avoid most of this BUT sometimes the reputation of non-admitted is not as good since they do not fall under state guidelines. On the other hand, your company will fail if it does not take care of customers and pay claims so you should be able to avoid that problem.
Being an insurance consultant from Europe I had to look up admitted vs. Non-admitted carriers:
I think that the article nicely sums up some of the considerations of the choice between admitted (guaranteed claims payments) and non-admitted (broader risk appetite and flexible pricing outside standards).
From a european perspective, I would definitely say admitted as all current changes in solvency legislation focuses on ensuring, that enough money is available to pay all claims. Especially given, that you include some longer-tailed business in personal injury and third party liability.
However, I would add some more parameters you should consider before you choose:
- Is it necessary for you to carry the risk yourself, or could you have a risk carrier and instead act like an agent? The carrier could then worry about being admitted or non-admitted.
- How do you plan to distribute - f.ex. Through partners? Would you being admitted/non-admitted be important to your partner? This is about them investing their good name in you as a risk carrier - you would not want to let them down.
- What do the endusers think? Is this an important distinction for them, or can you motivate your choice no matter if you are admitted or non-admitted.
- Since your product is specialty, can it even be an admitted insurance? If not, then your choice is easy.
Good luck with your insurance venture! If you have additional questions, I am happy to continue the dialogue over the phone.