What If I Have Trouble Finding Insurance for My Business?

In most cases businesses can obtain insurance in the standard insurance market with the help of a licensed and qualified insurance broker. However, if your business has experienced significant losses, your business is considered to be engaged in high-risk operations (with a greater chance of claims frequency or severity), or you have recently started your business, you may not be able to locate insurance in the standard commercial insurance market. You do have options, however, in securing commercial insurance elsewhere.

Surplus Lines Insurance

When an insurance broker is marketing your insurance coverage and has had applications declined from three licensed commercial insurance carriers, they can proceed to obtain insurance from the “surplus lines market.” Sometimes referred to as the “non-admitted” market, surplus line companies offer insurance to businesses that cannot obtain insurance in the standard insurance market. While these companies are not licensed by the California Department of Insurance (CDI), they do have to go through an approval process that includes providing evidence of minimum capital and other strict requirements. When these requirements have been met to the CDI’s satisfaction, the CDI may approve the company to conduct business in California and add them to the List of Approved Surplus Line Insurers.

A surplus line company can only be accessed through a specially licensed broker, also referred to as a wholesaler. The broker must have a surplus line license issued by the CDI in order to sell surplus line insurance. Before purchasing insurance from a surplus line insurance company, your insurance broker must provide you with a disclosure that the insurance you are buying is being issued from a surplus line company.

Although surplus line insurers must follow the Fair Claims Settlement Practices Regulations (regulations that govern how insurers handle claims), the CDI has limited jurisdiction over the operation of surplus line insurers. If the carrier becomes insolvent (goes bankrupt), your only course of action will be through the courts. The California Insurance Guarantee Association (CIGA), which protects claims with admitted insurers, does not apply to surplus line insurers. All insurance brokers should be able to supply information on the financial solvency of any surplus line company that it represents. There are independent rating organizations that analyze insurance company solvency such as A.M. Best Company.

Most states identify the standard lines insurance companies as “admitted,” “licensed” or “standard” and the excess and surplus lines insurance companies as “non-admitted,” “unlicensed” or “non-standard.” However, these terms tend to reflect a negative connotation in regards to the strength and security of a surplus lines insurer. The fact of the matter is, most states require surplus lines insurance companies to maintain higher minimum capital levels than they require admitted markets to carry. Just because a carrier isn’t licensed or admitted in the state of CA, don’t assume they’re inferior. Plenty of established businesses secure their insurance coverage through the surplus lines insurance market.

It’s safe to assume a ladder manufacturer secures their insurance from a surplus lines insurance carrier:

JK

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About Jim Kinmartin - CA Small Business Insurance Agent/Broker

Jim is a California licensed Property & Casualty AND Accident & Health insurance agent working at the ISU - Olson Duncan Insurance brokerage in Torrance, CA. He grew up in Fullerton, CA and graduated from Servite High School in Anaheim and Loyola Marymount University in Los Angeles and currently lives in Long Beach, CA. Have questions? Just ask! Or, follow Jim on Twitter at @JimKinmartin

One response to “What If I Have Trouble Finding Insurance for My Business?”

  1. home insurance lauderhill says :

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