Who is my Insurance Company?

Indentifying and Knowing

When we ask a client who their insurance company is they often answer with the name of their agent. We are flattered that you identify with Driehaus Insurance, but beyond our company is the insurer who provides the policy terms and conditions that will ultimately determine your claim settlement. You should know exactly who this is. Here are some of the terms that are important in identifying and knowing your insurance company.

Admitted versus Non-Admitted Status

Carriers can be an admitted carrier who is licensed in the state you are domiciled in and is subject to regulations and reviews by that state insurance authority. These are often called standard market companies. The products, rates and practices of these firms are all subject to state regulation.

A non-admitted carrier is not licensed by the state and does not have to submit its forms, pricing, and practices to state regulations. Non-admitted carriers are often referred to as Excess and Surplus (E&S) carriers. These markets are used when standard markets decline to offer coverage for your exposures. These markets may also offer coverage for emerging risks, high hazard exposures and new types of exposures that the standard market has not yet covered.

It is important that you know the difference as the forms and conditions of coverage for a non-admitted carrier may be different from those offered by a standard carrier. One area of difference with E&S companies is that many of their products are written on claims made basis. This means you have coverage for claims that are reported in the policy period.  This is different from a standard market occurrence form where coverage for any claim that occurs during a given covered policy term is covered regardless of reporting date. If you have any exposures that have a potential long reporting lag, this can be a significant concern. If you are new to claims made coverage, be sure to discuss this with your agent.

Insurer Financial Ratings

You need to have an insurer that will have the funds available to pay your claim. Insurance carriers are rated by several services that offer their opinion of the financial strength of the carrier. AM Best is the most prominent service provider with the following ratings: All of these ratings are in the opinion of AM Best.

Best Financial Rating Scale
Rating Categories	Rating Symbols	Rating Notches*	Category Definitions
Superior	A+	A++	Assigned to insurance companies that have a superior ability to meet their ongoing insurance obligations
Excellent	A	A-	Assigned to insurance companies that have an excellent ability to meet their insurance obligations
Good	B+	B++	Assigned to insurance companies that have an good ability to meet their insurance obligations
Fair	B	B-	Assigned to insurance companies that have a fair ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions
Marginal	C+	C++	Assigned to insurance companies that have a weak ability to meet their ongoing insurance obligations. Financial strength is very vulnerable to adverse changes in underwriting and economic conditions
Weak	D	-	Assigned to insurance companies that have a poor ability to meet their ongoing insurance obligations. Financial strength is extremely vulnerable to adverse changes in underwriting and economic conditions

*Each Strength Rating Category from “A+” to “C” includes a Rating Notch to reflect a graduation in financial strength.

In addition to the overall rating, there is also a Financial Size Category Rating assigned to each carrier. This is based on their policyholder surplus (PHS). The larger the surplus the more resources the carrier has to pay claims.

Financial Size Category Table
Class	Adjusted PHS ($ Millions)	Class	Adjusted PHS ($ Millions)
I	Less than 1	IX	250 to 500
II	1 to 2	X	500 to 750
III	2 to 5	XI	750 to 1,000
IV	5 to 10	XII	1,000 to 1,250
V	10 to 25	XIII	1,250 to 1,500
VI	25 to 50	XIV	1,500 to 2,000
VII	50 to 100	XV	2,000 or greater
VIII	100 to 250

Your agent should be able to provide these ratings to you as part of the quoting process. They are important as some lenders and contracts specify ratings and size categories for insurance policies. If your umbrella or excess liability policy is placed separately from your primary carrier, this policy may have rating and size requirements for the underlying insurance policies.

Agency or Broker Relationship

Depending on the carrier involved the relationship between that company and your insurance agent can vary. For most standard admitted companies the agent has a contract with that insurance company and acts as their agent. Their first duty is to the insurance company and the insurance company pays their commission and revenue. Agencies may represent multiple insurance companies, or the agent can be an employee of a single insurer.

A broker arrangement is when the insurance agent is working for the insured and solicits coverage from carriers with limited or no sales commission. The insurance agent has its first duty to the insured. The agent derives their revenue from fees for marketing and placing coverage and fees for ongoing policy service. This is a common arrangement for very large insurance programs. It can also be used when the policies being placed are E&S policies and the insurance carrier does not offer commission to the agent.

A hybrid arrangement can exist when an independent agent seeks coverage with carriers, they are not licensed with via a wholesale broker. The wholesale broker has access to multiple carriers and makes that available to independent agencies. Wholesale placements are generally done at reduced commission for the retail agent as the wholesale agent is taking compensation for the placement. This arrangement offers the retail agent a much wider marketplace for coverage.

The Driehaus Difference

We are an independent agency representing a number of insurance carriers. We have relationships with wholesale brokers to expand our reach into alternative markets. We have not pursued broker relationships or offering services outside of an insurance relationship.

We want to be your resource for insurance information and assistance. Knowing the type of carrier, their strength ratings, and the type of arrangement between the insurance company and the agent is information you need to know and to understand. Call us at 513-977-6860 or contact us on the internet at www.driehausins.com and we can discuss these business practices with you in detail.