There are many types of insurance companies. When you start to look for insurance, and you consider your options for purchasing insurance policies, you might receive multiple quotes from different insurance companies. It is useful to be aware of the general types, since the differences can impact the kinds of insurance that a business chooses to buy.
Knowing the type of insurance company you’re dealing with will help you to determine if you are getting the best deal on your policy.
Some of the different types of insurance companies include: standard lines, excess lines, captives, direct sellers, domestic, alien, mutual companies, stock companies, Lloyds of London and more. This is a quick overview of the different types of insurance companies, as well as the specialty risks that are insured and other unique attributes.
Bottomry contract is one of the oldest forms of insurance, dating back to between 4000 and 3000 BCE. This was an early form maritime insurance in which ship owners borrowed money to sail and pledged their ship as security. maritime law. (2019).
Standard lines carriers are just as they sound. A licensed insurance company that can sell and operate specific lines of insurance in one state. Admitted carriers is another term for standard line carriers. The state board of insurance regulates the rates for coverage in standard lines carriers. These licensed carriers are subject to the laws and restrictions in place.
Standard lines carriers must contribute to the state guarantee fund. The guarantee fund covers claims if the insurance company goes bankrupt.
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A “surplus line” company is another name for an insurance company that has excess lines. These companies specialize in covering high-risk risks, such as high-risk automobile insurance or high-risk individuals. They are not eligible for standard lines coverage due to their underwriting guidelines and restrictions. A driver with a history of speeding tickets, traffic violations, or a new company that has not had coverage before would be an example.
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This entity exists to cover the risks of its parent. This concept can also be used for insurance to a group of participants. Captive insurance companies are those that insure the risk of loss for a particular industry, group of people or type of risk like shipping (transit insurance), and fleet insurance. If a shipping company cannot find affordable coverage in the traditional insurance market, it might form its own insurance company. The parent company is the “captive” and the company that provides the insurance is the “captive”.
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Direct selling is a company that doesn’t use insurance agents and sells directly to consumers. Although many of these companies have local representatives in their field offices, the majority of business is done online or by phone. Because a direct seller does not use local agents, a policyholder must deal directly with the company for quoting, purchasing a policy and for any changes that are needed to the policy. It is important to decide whether the customer is comfortable dealing with an insurance company directly or prefers to use the services of an independent agent.
GEICO is a well-respected direct-writer insurance company.
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Domestic insurance companies are licensed and operate in the state they are located. Although the company may be licensed to do business in other states, it is not considered an alien carrier.
This entity is considered to be a domestic insurance company in the state it is located in, as well as a foreign insurance company in all other states. However, it can still be licensed to operate in other states.
An alien insurance company can be incorporated under the laws of another country. It is considered an entity outside of the country in which it operates. An example: A U.S.-incorporated insurance company operating in France could be considered an alien carrier.
Lloyds of London
This is insurance that is underwritten by a business. These entities are more likely than others to provide coverage for unusual or high-risk items as well as other types of insurance.
Although the risks may be unusual, such as offshore oil risks or celebrity body parts, insurance covers “main street” and other common risks.
Lloyd’s of London is a specialist in the insuring of the unusual. Some of its most unique items it has insured are Betty Grable’s legs, Egon Ronay, a food critic, and 40 members of a Derbyshire Whiskers Club, who insure their beards against theft and fire. (“Innovation, unusual risks – Lloyd’s” – The world’s largest specialist insurance market. Also known as Lloyd’s of London, it is a market where members come together to form syndicates to insure risk. “, 2019,
The policyholders are considered shareholders of mutual companies. They can receive dividend payments and are not subject to an increase in premium for losses. Losses are not usually charged back to policy holders, based on the terms of their insurance agreements. This may vary from company to company. Liberty Mutual is a well-known mutual company.
Stock Companies and Other Classifications
Stock companies are corporations that have shareholders. They distribute dividends to shareholders from excess earnings. A company can also be classified as either a monoline carrier, which means it only writes one type of insurance, or a multi-line carrier that writes policies for multiple types.
A company’s type of insurance service can also determine how it is classified. A monoline insurance company may only offer one type of insurance. However, a multiline insurance company can offer several types of insurance. A financial services company may offer other types of financial services as well as insurance products.
You may make a decision to buy insurance from either a captive company agent or an independent agent who represents several companies. You can also learn more about different types of insurance to help you find the best price when purchasing a policy.