Admitted insurance companies have received approval by the state's insurance department. By contrast, non-admitted insurance companies have not received state approval.
Short answer: An admitted insurance carrier is backed by the state and must follow state regulations. A non-admitted insurance company is not supported by the state and thus does not have to follow certain regulations.
By definition, admitted insurance companies:
• will be supported by the state to pay for claims in the event the insurance carrier fails financially
• must comply with regulations from the state's department of insurance
Non-admitted insurance companies:
• is not required to company with certain state insurance regulations
• will not be supported by the state in the event the insurance carrier fails financially
• cannot have cases appealed to the state insurance department (in the event that policyholders believe their claims were not handled properly)
While there are scenarios where each option may be better suited for a business owner, the decision boils down to a few key elements.
• The ability to appeal a claim to a state's insurance department
• The guarantee claims will be covered by the state in the event of financial ruin for the carrier
• Avoiding certain fees when purchasing a policy (as admitted carriers may not need to charge those expenses)
Non-Admitted carriers may cover claims for events that admitted carriers do not.