Sunday, August 27, 2017

Delaware Business Insurance Update From CNC Insurance Associates. " Standard Markets vs Surplus Markets, What's the Difference? 8-27-17

As a business owner you will be exposed to the insurance marketplace in various ways as you buy and use insurance. You will hear from your insurance professional terms like "standard market", and "surplus market" , and you may wonder what all this means?  So I thought I will go through this briefly to give you some clarification.
The insurance industry is regulated by the states. Each state will  license and monitor the activity of insurance companies that want to do business in the state. These companies are "admitted"  into the state and generally are determined to be "standard markets".  The state backs up the buyers of insurance from  "standard markets" if they cannot  pay claims. This is usually done with a guarantee fund set up by the legislature. "Standard markets" usually insure the risks that are considered normal risk or lower risk and cover the majority of the insurance needs for business.
Now when a business is a high risk business, the "standard market" will take a pass and will not want to write insurance on these businesses. This is where the "excess or surplus market" comes in to play. This market will cover the higher risk businesses and usually charge more premium to do it. The states still regulate these surplus companies but do not back policyholders if the company cannot pay claims.
So two major differences between "standard markets" and "surplus markets", is the backing from the states and the appetite to write low risk or high risk business.  There are a few more differences but as a business owner, just knowing the two major differences will help when dealing with business insurance. As always you can ask your insurance professional to explain more before you buy. Until next time be careful out there and know your risks.

G. Kevin Nemith. President CNC Insurance Assoc. & The Business Insurance Center
Serving DE, MD, PA, NJ & VA