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What is the difference between an admitted and a non-admitted insurer?
An admitted insurer is a company that has met all of the qualifications designed by the DOI and has received a Certificate of Authority from the DOI to transact insurance in California, whereas a non-admitted insurer has not complied or been denied.
An admitted insurer is a company that has met most of the qualifications designed by the DOI and has received a Certificate of Authority from the DOI to transact insurance in California, whereas a non-admitted insurer has not applied or been denied.
An admitted insurer has met all the qualifications designed by the DOI but hasn`t received a Certificate of Authority because they are not licensed in the state of California and a non-admitted insurer is licensed in the state of California.
A non-admitted insurer is a company that has met all of the qualifications designed by the DOI and has received a Certificate of Authority from the DOI to transact insurance in California, whereas an admitted insurer has not complied or been denied.
Any person who makes a comparison of insurers or policies to an insured, which is misleading for the purpose of inducing, or intending to induce him or her to lapse, forfeit, change, or surrender his or her policy is guilty of a ___________________.
- Felony, and is subject to a sentence or fine not to exceed five hundred dollars or imprisonment for a period not to exceed one year.
- Misdemeanor, and is subject to a sentence or fine not to
exceed one hundred dollars or imprisonment for a period not to exceed six months.
- Felony, and is subject to a sentence or fine not to exceed one thousand dollars or imprisonment for a period not to exceed one year.
- Misdemeanor, and is subject to a sentence or fine not to exceed $25,000.00 or imprisonment for a period not to exceed one year.
A surplus lines broker places insurance with non-admitted insurers. The following acts are considered unlawfully acting as an insurer without a certificate of authority and are prohibited except when performed by surplus lines brokers:
-Acting as an agent for a nonadmitted insurer in the transaction of insurance business in California for a home state insured.
-Advertising a nonadmitted insurer in California in any maner
-Aiding a nonadmitted carrier in any other way to
transact insurance in California for a home state insured
A person found guilty of unauthorized dealings with a non-admitted insurer may be penalized by the commissioner and the state. A licensee who misrepresents to any surplus lines broker any material fact regarding insurance coverage, or facts regarding rules of submission or rates, or conspires to procure non-admitted insurance in violation of the law, may have his license suspended, revoked, or denied. Any person who willfully violates the surplus lines regulations is guilty of a misdemeanor and is punishable by a fine not exceeding $10,000, or imprisonment in the state prison, or in a county jail, for not exceeding one year, or both. In addition to any penalty provided for commission of misdemeanors, a person violating any provision of this section shall forfeit to this state the sum of five hundred dollars ($500), together with one hundred dollars ($100) for each month or fraction thereof during which he or she continues the violation.
When a surplus line broker's license is revoked for any reason other than the insufficiency of his sureties, a new license shall not be issued to him within one year after such revocation and until all indebtedness of the broker on former business has been paid to the commissioner.
Any person may negotiate and effect insurance to protect himself, herself, or itself against loss, damage, or liability with any nonadmitted insurer.
The provisions limiting the insurance that may be placed with nonadmitted insurers and requiring any report thereof shall not apply to:
1. Reinsurance of the liability of an admitted insurer.
2. Insurance against perils of navigation, transit or transportation upon hulls, freights or disbursements, or other shipowner interests; upon goods, wares, merchandise and all other personal property and interests therein, in the course of exportation from or importation into any country, or transportation coastwise, including
transportation by land or water from point of origin to final destination and including war risks; and marine builder's risks, drydocks and marine railways, including insurance of ship repairer's liability, and protection and indemnity insurance, but excluding insurance covering bridges or tunnels.
3. Aircraft or spacecraft insurance.
4.Insurance on property or operations of railroads engaged in interstate commerce.
The insurance specified in bullets (2), (3), and (4) above may be placed with a nonadmitted insurer only by and through a special lines' surplus line broker.
A surplus line broker may solicit and place insurance for a home state insured with nonadmitted insurers only if that insurance cannot be procured from insurers admitted for the particular class or classes of insurance and that actually write the particular type of insurance in this state. Each surplus line broker shall be responsible to ensure that a diligent search is made among insurers that are admitted to transact and are actually writing the particular type of insurance in this state before procuring the insurance for a home state insured from a nonadmitted insurer. Each surplus line broker shall file a standardized form to be prescribed by the commissioner setting forth the diligent efforts to place the coverage with admitted insurers and the results of these efforts. The form shall be signed by a person licensed under this code who has made the diligent search required by this section or who supervised an unlicensed person or persons who actually conducted the search.
The insurance shall not be placed with a nonadmitted insurer for the purpose of procuring a rate lower than the lowest rate that will be accepted by any admitted insurer. It shall be conclusively presumed that insurance is placed in violation of this section if the insurance is actually placed with a nonadmitted insurer at a lower rate of premium or lower premium than the lowest rate of premium or the lowest premium that could be obtained from an admitted insurer unless, at the time the insurance attaches, there is filed with the commissioner a statement describing the insurance, specifying the rate and the nearest procurable rates from admitted insurers. The statement shall include an explanation of the reasons that the insurance must be placed with a nonadmitted insurer even though it is available from an admitted insurer.
Every nonadmitted insurer and surplus line broker shall be responsible to ensure that, at the time of accepting an application for an insurance policy, other than a renewal of that policy, the signature of the applicant on the disclosure statement is obtained. The surplus line broker shall maintain a copy of the signed disclosure statement in his or her records for a period of at least five years. The disclosure statement shall be in boldface 16-point type on a freestanding document. In addition, every policy or certificate issued by a nonadmitted insurer shall contain the disclosure statement in boldface 16-point type on the front page of the policy. If the applicant has not received and completed the signed disclosure form, he or she may cancel the insurance so placed. The cancellation shall be on a pro rata basis as to premium, and the applicant shall be entitled to the return of any broker's fees charged for the placement.
The following notice shall be provided to home state insureds and home state insured applicants for insurance, and shall be printed in English and in the language principally used by the surplus line broker and nonadmitted insurer to advertise, solicit, or negotiate the sale and purchase of surplus line insurance. The surplus line broker and nonadmitted insurer shall use the appropriate bracketed language for application and issued policy disclosures:
NOTICE:
THE INSURANCE POLICY THAT YOU [HAVE PURCHASED] [ARE APPLYING TO PURCHASE] IS BEING ISSUED BY AN INSURER THAT IS NOT LICENSED BY THE STATE OF CALIFORNIA. THESE COMPANIES ARE CALLED "NONADMITTED" OR "SURPLUS LINE" INSURERS.
THE INSURER IS NOT SUBJECT TO THE FINANCIAL SOLVENCY REGULATION AND ENFORCEMENT THAT APPLY TO CALIFORNIA LICENSED INSURERS.
THE INSURER DOES NOT PARTICIPATE IN ANY OF THE INSURANCE GUARANTEE FUNDS CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE INSURER BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS PROMISED.
THE INSURER SHOULD BE LICENSED EITHER AS A FOREIGN INSURER IN ANOTHER STATE IN THE UNITED STATES OR AS A NON-UNITED STATES (ALIEN) INSURER. YOU SHOULD ASK QUESTIONS OF YOUR INSURANCE AGENT, BROKER, OR "SURPLUS LINE" BROKER OR CONTACT THE CALIFORNIA DEPARTMENT OF INSURANCE AT THE FOLLOWING TOLL-FREE TELEPHONE NUMBER ____ OR INTERNET WEB SITE WWW.INSURANCE.CA.GOV. ASK WHETHER OR NOT THE INSURER IS LICENSED AS A FOREIGN OR NON-UNITED STATES (ALIEN) INSURER AND FOR ADDITIONAL INFORMATION ABOUT THE INSURER. YOU MAY ALSO CONTACT THE NAIC'S INTERNET WEB SITE AT WWW.NAIC.ORG.
FOREIGN INSURERS SHOULD BE LICENSED BY A STATE IN THE UNITED STATES AND YOU MAY CONTACT THAT STATE'S DEPARTMENT OF INSURANCE TO OBTAIN MORE INFORMATION ABOUT THAT INSURER.
FOR NON-UNITED STATES (ALIEN) INSURERS, THE INSURER SHOULD BE LICENSED BY A COUNTRY OUTSIDE OF THE UNITED STATES AND SHOULD BE ON THE NAIC'S INTERNATIONAL INSURERS DEPARTMENT (IID) LISTING OF APPROVED NONADMITTED NON-UNITED STATES INSURERS. ASK YOUR AGENT, BROKER, OR "SURPLUS LINE" BROKER TO OBTAIN MORE INFORMATION ABOUT THAT INSURER.
CALIFORNIA MAINTAINS A LIST OF APPROVED SURPLUS LINE INSURERS. ASK YOUR AGENT OR BROKER IF THE INSURER IS ON THAT LIST, OR VIEW THAT LIST AT THE INTERNET WEB SITE OF THE CALIFORNIA DEPARTMENT OF INSURANCE: WWW.INSURANCE.CA.GOV.
IF YOU, AS THE APPLICANT, REQUIRED THAT THE INSURANCE POLICY YOU HAVE PURCHASED BE BOUND IMMEDIATELY, EITHER BECAUSE EXISTING COVERAGE WAS GOING TO LAPSE WITHIN TWO BUSINESS DAYS OR BECAUSE YOU WERE REQUIRED TO HAVE COVERAGE WITHIN TWO BUSINESS DAYS, AND YOU DID NOT RECEIVE THIS DISCLOSURE FORM AND A REQUEST FOR YOUR SIGNATURE UNTIL AFTER COVERAGE BECAME EFFECTIVE, YOU HAVE THE RIGHT TO CANCEL THIS POLICY WITHIN FIVE DAYS OF RECEIVING THIS DISCLOSURE. IF YOU CANCEL COVERAGE, THE PREMIUM WILL BE PRORATED AND ANY BROKER'S FEE CHARGED FOR THIS INSURANCE WILL BE RETURNED TO YOU."
The producer shall insert the current toll-free telephone number of the Department of Insurance as provided in paragraph 4 of the notice.
Surplus line brokers may advertise and solicit using print, electronic media, direct mail, and all other advertising or marketing media. These advertisements and solicitations may include a description of nonadmitted insurance products available through the surplus line broker, and may include the name of any nonadmitted insurer, provided that all of the following apply: (a) the insurer is authorized to accept placements from the surplus line broker, (b) a nonadmitted insurer's name is not used in connection with any nonadmitted insurance product of that insurer, (c) the unlicensed status of the insurer or of the insurance products is disclosed in type of a size no smaller than any telephone number, address, or fax number appearing in the advertisement or solicitation, and (d) the advertisement or solicitation does not contain any assertion, representation, or statement with respect to the business of insurance, or with respect to any person in the conduct of his or her insurance business, that is untrue, deceptive, or misleading, and that is known, or that by the exercise of reasonable care should be known, to be untrue, deceptive, or misleading. If the insurance is available from an eligible nonadmitted insurer that is a member of a group of insurers, advertisements and solicitations in accordance with this section may include the name of the group. A surplus line broker's advertisements and solicitations shall not include any information about a nonadmitted insurer's premiums or rates.
Every California home state insured for whom insurance has been effected with nonadmitted insurers shall, upon request in writing by the commissioner, produce for the commissioner's examination all policies, contracts, and other documents evidencing that insurance, and shall disclose to the commissioner the amount of the gross premiums paid or agreed to be paid for that insurance. For refusal to obey that request, the insured shall forfeit to the State of California the sum of one thousand dollars ($1,000) for each refusal.