Insurance Companies of the USA

 By: Andrew Andreeff
You have decided to buy an insurance policy. One of the first questions: "What insurance company to choose?" We shall try to help you.

The companies are subdivided into 2 groups:

- LIFE insurance companies, which sell life insurance, annuities and pensions products.
- NON-LIFE, General, or Property/Casualty insurance companies, which sell other types of insurance.

The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature coverage for life insurance or a pension can cover risks over many decades.

NON-LIFE insurance companies can be further divided into these sub categories:

- Standard Lines
- Excess Lines.

In the USA, Standard Line insurance companies are "main stream" insurers. These are the companies that typically insure autos, homes or businesses. They use pattern or "cookie-cutter" policies without variation from one person to the next. They usually have lower premiums than excess lines and can sell directly to individuals. They are regulated by state laws that can restrict the amount they can charge for insurance policies.

Excess Line insurance companies (aka Excess and Surplus) typically insure risks not covered by the standard lines market. They are broadly referred as being all insurance placed with non-admitted insurers. Non-admitted insurers are not licensed in the states where the risks are located. These companies have more flexibility and can react faster than standard insurance companies because they are not required to file rates and forms as the "admitted" carriers do. However, they still have substantial regulatory requirements placed upon them. State laws generally require insurance placed with surplus line agents and brokers not to be available through standard licensed insurers.

Insurance companies are generally classified as either mutual or stock companies. Mutual companies are owned by the policyholders, while stockholders (who may or may not own policies) own stock insurance companies.

Are available also Reinsurance companies and Captive insurance companies.

Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses.

Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups.

Legally, the insurance companies can be divided into 9 categories:

1. Domestic. This type of insurance company is incorporated and formed under the laws of the state in which it is domiciled.

2. Foreign. This type of insurance company is also domestic company as it is domiciled in one state but it is licensed to do business in another state.

3. Alien. This type of insurance company is often confused with a Foreign insurance company.

4. Authorized (Admitted) and Unauthorized (Unadmitted). Upon applying for approval to do business in a state, the insurance company receives a certification of authority from the state Insurance Department (Division).

5. Stock Company. As the name implies, a stock company is an insurance company that is owned by the shareholders.

6. Mutual Company. This type of company is owned by the people and/or businesses the company insures.

7. Reciprocal (Assessment) Company. Nonincorporated associations of individuals or business, called subscribers, engage in cooperative insurance programs.

8. Fraternal Benefit Society. This type of social organization has bylaws allowing it to sell insurance to its members.

9. Lloyd's Insurer. It is a number of people organized into syndicates or groups for the purpose of underwriting risks. Lloyd's operate on many of the same principles as a stock exchange.

Insurance companies are rated by various agencies such as A. M. Best. The ratings include the company's financial strength, which measures its ability to pay claims.
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