Guidance to Insurance Markets for Certified Business Enterprises
Are you the owner of a Certified Business Enterprise (CBE) in the District of Columbia with questions about insurance coverage?
There are a number of avenues or markets available for insurance coverage, ways to access these markets, and benefits, drawbacks and qualifiers related to each market or avenue. There are also important questions to pose to your producer or broker when exploring coverage.
The Admitted Market
What is the Admitted Market?
The “admitted market” also called the “standard insurance market” is comprised of insurance policies sold by companies licensed by the Department of Insurance, Securities and Banking (DISB) to operate and sell policies in the District and must comply with DC laws and regulations.
The Products
The products offered in the admitted market contain standardized language with little variance, and include Workers' Compensation (W/C), Commercial General Liability (CGL), Business Owners’ Policies (BOP), commercial auto (CA), Cyber-insurance, Umbrella, and Professional Liability (Errors & Omission/Directors & Officers).
The Producers
DC licensed producers (agents or brokers) sell standardized products from admitted insurers. Information about licensed producers or insurers can be found via DISB or a website search. An insurance producer can be an independent producer, an exclusive (captive) agent of an insurance company or an intermediary of an insurer.
Admitted Market Access
The admitted market can be accessed easily by contacting and working with an insurance agent or broker who identifies and quotes coverage offered by licensed DC insurers. You can also research and contact some insurance companies directly to inquire about license status and coverage options.
Pros: Insurance policies purchased through admitted market insurers provide more protections for the purchaser. Admitted market insurance policies are backed by the District of Columbia’s guaranty fund, which provides some protection to policyholders in the case of the insurer’s insolvency.
Cons: These products are standardized and may be unable to provide large coverage limits or coverage for complex or high-risk businesses.
Questions to ask an agent/producer or broker: Are there strategies, programs and practices I can utilize to help reduce my commercial insurance risk(s) and premium cost? Is there a Workers’ Compensation workplace safety premium credit program and how does that work?
Non-Admitted or Excess & Surplus Lines Market
What is the Non-Admitted or Excess & Surplus (E&S) Lines Market?
The “non-admitted or excess and surplus lines market” (Surplus Lines) is comprised of insurers who are authorized to provide policies or insurance coverage through an agent, broker or intermediary that are not available in the admitted market.
The Products
Surplus lines products are offered by non-admitted insurance companies. The non-admitted insurance market sells insurance products for high-capacity risks, unusual, unique exposures, difficult-to-insure risks or risks with unfavorable attributes admitted insurers aren’t able to accommodate. Non-admitted insurance may cover special events, taverns, pubs, atypical umbrella and excess liability exposures, building demolition contractors and vacant or unoccupied buildings.
The Surplus Lines Insurer
A non-admitted or surplus lines insurer is not licensed to operate in DC; however, a DC producer, broker or intermediary can locate and sell policies from a non-admitted carrier if they have surplus lines authority.
The Producers, Brokers or Intermediaries
A surplus lines insurance representatives specialize in placing insurance policies with "non-admitted" or "E&S" insurers. These producers require extensive knowledge of niche markets and have complex risk assessment experience. They often work with clients to secure coverage for businesses that admitted insurers do not cover, have a poor loss history, have a new venture with high-risk potential, have a unique or hazardous operation, or a risk requiring high insurance limits not available in the standard market.
Surplus Lines Market Access
The surplus lines market can be accessed through a licensed DC "surplus lines broker" who specializes in finding coverage from non-admitted insurers. The surplus lines broker will often reach out to a wholesale or managing general agent (MGA) who will secure coverage with a surplus lines insurer in the non-admitted market.
Pros: Insurance policies purchased from surplus lines markets have greater price flexibility, product variety, and coverage options and can be customizable for specific business needs.
Cons: Products offered in this market afford less protection for the purchaser and purchasers are often responsible for incidental expenses like taxes or additional administrative costs.
Questions to ask an agent/producer, or broker: Are you authorized by DISB to sell products from the surplus lines market? If so, do you personalize coverage? Do you help identify areas where I can improve company policies and procedures to reduce my risk and liability?
Residual Market or Assigned Risk Market
What is the Residual Market or Assigned Risk Market?
The “residual market or assigned risk market” is an insurance market that offers coverage to individuals and businesses where insurance coverage has been declined, cancelled, non-renewed or rejected by admitted or voluntary market insurers. It is operated by charter established by DISB.
The residual market is often called the market of “last resort” because it is often the last place a business can turn to meet certain contract or regulatory licensing requirements.
The Product
Workers' Compensation, Commercial Automobile Liability, and Commercial Property are types of business coverage offered through this market. Policies cover liability for tow-trucker drivers, unoccupied commercial buildings, 4-unit owner occupied buildings, etc.
The Producer
If your business insurance has been cancelled, non-renewed, or denied your producer or insurer must provide a rejection letter or notification citing the reasons for termination or denial. This notification must contain contact information about the residual or assigned risk market. The three residual markets in the District of Columbia are the National Council on Compensation Insurance workers' (NCCI) compensation , AIPSO (formerly an acronym for Automobile Insurance Plans Service Office and now the organization's official name) and the District of Columbia Property Insurance Facility (DCPIF).
Residual or Assigned Risk Market Access
To access the assigned risk market, you typically need to contact your insurance agent or broker and inform them that you've been unable to secure coverage in the standard market, prompting them to submit an application through DC’s respective assigned risk program on your behalf. You may need to provide proof of termination, cancellation or non-renewal from your insurer or other insurers first. In some situations, applications can be submitted online or by mail.
Pros
The residual market is an available option for businesses that have been cancelled, non-renewed or denied coverage by an admitted insurer. This market ensures availability of necessary or statutorily mandated insurance coverage. Insurance coverage (premiums) can be financed.
Cons
Coverage may be limited and less comprehensive. Premiums can be higher reflecting the risk. Premium finance options may have higher interest rates.
Resources
Commercial Buildings--The District of Columbia Property Insurance Facility (DCPIF) offers a commercial fire program for commercial building owners and tenants.
Commercial Automobiles--The District of Columbia Automobile Insurance Plan (D.C.A.I.P.) is available to consumers with a valid DC driver's license and a vehicle registered in the District of Columbia.
Workers' Compensation--The National Council on Compensation Insurance (NCCI) is the District of Columbia Assigned Risk Pool or market of last resort for businesses that can't find coverage in the private or voluntary insurance market.
Additional Markets
It is important to briefly note other markets that may fall outside a typical CBE’s structure, its needs or resources. They are:
- The Self-Procurement Market allows a business to directly procure insurance coverage from a non-admitted insurer.
- The Reinsurance Market provides financial protection for businesses that self-insure and allows the business to transfer a portion of their self-insured risk to a reinsurer to protect against catastrophic losses.
- A Joint Underwriting Association (JUA) is typically established by a state or municipality to provide coverage for high-risk or hard-to-insure groups or categories of insurance needs.
- A Risk Retention Group may be formed under most corporate structures, including a stock, mutual or LLC-based company.
It is important to understand your business needs and the insurance market. It is equally important to work with a trusted advisor, attorney, or a producer/broker to discuss the best direction or right coverage for your CBE. DISB representatives can provide general information about licensing or answer general insurance questions.
For more information, contact DISB at 202.727.8000.
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