When dealing with insurance agents and insurance companies, it is important to know what kind of insurance your company needs in order to get the coverage that you require. The two main types of insurance companies providing coverage are Standard Carriers and Excess and Surplus Lines (E&S) carriers.
While there are advantages to both types of insurance carriers, only one or the other may be available to you, depending on your business type, coverage needs and other underwriting factors. Here is how they differ:
A Standard Insurance Carrier (sometimes called a preferred or admitted carrier) is typically the first stop an insurance agent will make on the journey to securing insurance coverage. Standard carriers are the big names you think of when you heard the word “insurance” – the ones that advertise during the Super Bowl, in magazines or on the radio.
Standard insurance companies are licensed and authorized to do business in your state, and usually in many others as well. Because they are regulated by the state insurance department, their premium rates and policy forms are filed with the state. These carriers are usually subject to any department imposed fees or surcharges, but are not subject to state surplus lines taxes.
Your direct agent or independent insurance broker may go directly to one of these carriers to secure coverage. Businesses that qualify for a standard insurance policy include established main street businesses, those with very few claims and those businesses that could benefit from a standard insurance policy with little or no deviation from standard coverages. Some companies have specialized programs for small businesses and contractors that fit certain criteria.
Excess & Surplus Lines Carriers
An Excess and Surplus Lines carrier (also know as E&S, surplus lines or non-admitted carrier) is an insurance company that is licensed and authorized to do business in your state (and many others). They are not regulated in the same way that standard carriers are, which results in a more flexible insurance product.
E&S carrier policies are usually written on insurance industry standard forms from the Insurance Services Office (ISO) or on manuscript or blank (but completed) forms that allow the carrier to tailor coverage to the specific needs of the insured. Since the coverages can be tailored, the premium can also be tailored to the specifics of the business being insured. This may allow for higher rates that are commensurate with the risks being insured. All insurance premiums through E&S carriers are subject to state surplus lines taxes.
Because of the level of customization, E&S insurance policies are good for just about any type of business. They are especially good for newly established business with little or no business experience, businesses with large or frequent claims, or those businesses that have unique coverage requirements unavailable in the standard market.
In some cases, premiums for certain lines of coverage may actually be lower than standard carrier rates. However, all states require that at least three (3) standard carriers be offered the opportunity to quote the policy and decline it before a surplus lines broker may be approached to secure an E&S quote.
For example, a pest control company may qualify for a standard insurance carrier policy for normal operations. However, a pest control company that also does feral animal trapping would not qualify for a standard policy and would need to be quoted in the E&S market to receive coverage for those operations the standard carrier may deem uninsurable under their own policy.
No matter what your business entails, there is coverage available for you. An independent broker will have access to both standard markets and E&S markets and can help you determine which would be a better fit for your business.