What Are the Different Types of Insurance Companies?

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When you begin to shop for insurance and consider your options for purchasing an insurance policy, you may receive multiple insurance quotes for coverage from different types of insurance companies. If you know what type of insurance company you are dealing with, you will have a better idea of whether you are getting the best value on your insurance policy.

Some of the different types of insurance companies include: standard lines, excess lines, captives, direct sellers, domestic, alien and Lloyds of London.

Here is a brief explanation of each of these different types of insurance companies and the specific specialty risks insured and other unique attributes.

Standard Lines

A standard lines carrier is much as its name implies. It is an insurance company that has a license to operate and sell specific lines of insurance in a particular state. Another word for standard lines carriers is “admitted carriers.” The rates charged for coverage for a standard lines carrier is regulated by the state board of insurance in the state or states where it offers coverage. These admitted carriers are also subject to laws and restrictions of the states where licensed to operate.

A standard lines carrier must contribute to a state guarantee fund. This guarantee fund pays claims presented should the insurance company become insolvent.

Excess Lines

Another name for an excess lines insurance company is a “surplus lines” company.

These types of companies mainly insure specialty risks such as high-risk auto insurance or high-risk individuals that would not be eligible for coverage by a standard lines carrier because of its underwriting guidelines or restrictions. An example would be a driver who has many speeding tickets or other traffic violations or a company who has just opened up and has no prior coverage.

Captives

A captive insurance company is one that typically insures the risks of a specific industry or group of individuals or a specific type of risk such as shipping (transit insurance) and fleet insurance. For example, if a shipping business could not find affordable coverage through the standard insurance market, it may form a company to provide insurance for itself. The company created to provide the insurance is a “captive” of the parent company.

Direct Sellers

A company that sells directly is one that does not use insurance agents but sells directly to the insurance consumer. Many of these direct selling companies do have local field offices with company representatives but the majority of the business is conducted online or over the 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. The determining factor in using a direct insurance writer is whether or not the insurance customer feels comfortable dealing directly with the insurance company or whether he prefers the services of his local independent insurance agent. One well-known direct writer insurance company is GEICO.

Domestic

A domestic insurance company operates and is licensed in the state where it is domiciled. The company can be licensed to operate in other states but is considered an alien carrier in those states.

Alien

The alien insurance company is incorporated on laws of another country. For example, an insurance company incorporated as a U.S. company but operating in France would be considered an alien carrier by the perspective of France.

Lloyds of London

Lloyds of London specializes in insuring unusual or high-risk items and are underwritten through authorization of the English Parliament. Even though the risks are often unusual such as celebrity body part or offshore oil risks, “main street” or more common types of risks are also insured.