Types of Insurers

Unlock the world of insurers with our comprehensive guide. Explore the diverse landscape of insurance providers, from health and auto to life and beyond. Stay informed about the latest industry trends, coverage options, and tips for choosing the right insurer. Whether you’re seeking protection for your health, assets, or loved ones, our resource empowers you with the knowledge to make informed decisions. Navigate the insurance market confidently and secure the coverage you need for a resilient future. Explore insurers and optimize your protection today!


Insurance is available from both private companies and the government. The major difference between government and private insurance is that the government programs are funded with taxes and serve national and state social purposes, while private policies are funded by premiums.

Private insurance companies can be classified in a variety of ways:

  • Ownership;
  • Authority to transact business;
  • Location (domicile);
  • Marketing and distribution systems; or
  • Rating (financial strength).

As you read about different classifications of insurers, keep in mind that these categories are not mutually exclusive, and the same company can be described based on where it is located and allowed to transact the business of insurance, who owns it, and what type of agents it appoints

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Types of Insurers

Stock Companies

Stock companies are owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. Officers are elected by the stockholders and manage stock insurance companies. Traditionally, stock companies issue nonparticipating policies, in which policyowners do not share in profits or losses.

A nonparticipating (stock) policy does not pay dividends to policyowners; however, taxable dividends are paid to stockholders. The dividends are not guaranteed as they are based on company profit.

Mutual Companies

Mutual companies are owned by the policyowners and issue participating policies. With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are a return of excess premiums and are, therefore, nontaxable. Dividends are generated when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus. Dividends are not guaranteed.

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Fraternal Benefit Societies

A fraternal benefit society is an organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government. Fraternals sell only to their members and are considered charitable institutions, and not insurers. They are not subject to all of the regulations that apply to the insurers that offer coverage to the public at large.

In most states, fraternal benefit societies are permitted to issue life insurance (including endowments), health insurance (including medical and disability), and annuities. They do not issue property or liability policies.


A reciprocal exchange is insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers. A reciprocal exchange is an unincorporated insurance company managed by an attorney-in-fact common to all subscribers, that operates like a mutual company. Subscribers agree to become liable for their share of losses and expenses incurred among all subscribers, and they authorize the attorney-in-fact to manage and operate the exchange.

Risk Retention Groups

A risk retention group (RRG) is a liability insurance company owned by its members. The members are exposed to similar liability risks by virtue of being in the same business or industry. The purpose of a risk retention group is to assume and spread all or part of the liability of its group members. A risk retention group may reinsure another risk retention group’s liability as long as the members of the second group are engaged in the same or similar business or industry.

Lloyd’s Associations

Lloyd’s is not an insurance company. Lloyd’s provides support facilities for underwriters or groups of individuals that accept insurance risk.

Lloyd’s associations are a group of individuals who operate an insurance mechanism using the same principles of individual liability of insurers that Lloyd’s of London uses, in that each individual underwriter assumes a part of each risk. Each individual promises to pay a specified amount in the event that the contingency insured against occurs. Members are liable only for their portion of the risk and are not bound to assume any portion of a defaulting member.

While Lloyd’s formed in this country operate in essentially the same manner as Lloyd’s of London, they are not subject to the strict regulation which Lloyd’s of London imposes upon its members. Most states have laws which prohibit the organization or licensing of American Lloyd’s. Those Lloyd’s which do exist operate almost exclusively in the property insurance field.

Surplus Lines

Surplus lines is type of coverage that is not readily available on admitted market. Such coverages are marketed through nonadmitted insurers who specialize in offering insurance to the high-risk market on an unregulated basis under each state’s surplus lines laws. While surplus lines insurers are not admitted, most states require that they be on that state’s “approved” list.

Authorized or Admitted vs. Unauthorized or Nonadmitted Insurers

Before insurers may transact business in a specific state, they must apply for and be granted a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set by the state. Insurers who meet the state’s financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer. Those insurers who have not been approved to do business in the state are considered unauthorized or nonadmitted. Most states have laws that prohibit unauthorized insurers from conducting business in the state, except through licensed excess and surplus lines brokers.

Insurers must obtain a Certificate of Authority prior to transacting business in this state.
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Domestic, Foreign and Alien Insurers

Insurance companies are classified according to the location of incorporation (domicile). Regardless of where an insurance company is incorporated, it must obtain a Certificate of Authority before transacting insurance within the state.

A domicile refers to the location where an insurer is incorporated, not necessarily where the insurer conducts business.
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A domestic insurer is an insurance company that is incorporated in this state. In most cases, the company’s home office is in the state in which it was formed — the company’s domicile. For instance, a company chartered in Pennsylvania would be considered a Pennsylvania domestic company.

A foreign insurer is an insurance company that is incorporated in another state, the District of Columbia, or a territorial possession. Currently, the United States has 5 major U.S. territories: American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands.

For example, a company chartered in California would be a foreign insurer within the state of New York. A company chartered in Puerto Rico will be foreign in any U.S. state.

An alien insurer is an insurance company that is incorporated outside the United States.

Financial Solvency Status (Independent Rating Services)

The financial strength and stability of an insurance company are two vitally important factors to potential insureds. The financial strength of an insurance company is based on prior claims experience, investment earnings, level of reserves (amount of money kept in a separate account to cover debts to policyholders), and management, to name a few. Guides to insurance companies’ financial integrity are published regularly by the following various independent rating services:

  • AM Best
  • Fitch
  • Standard and Poor’s
  • Moody’s
  • Weiss
Health insurers must offer pediatric dental coverage (for children 18 or younger) as an essential health benefit under a health plan or as a stand-alone dental plan.
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The National Association of Insurance Commissioners (NAIC) is an organization composed of insurance commissioners from all 50 states, the District of Columbia, and the U.S. territories.

The NAIC resolves insurance regulatory problems. They are active in the formation and recommendation of model legislation and regulations designed to bring uniformity from state to state and simplify the marketing of insurance.

The NAIC is funded by member states by charging members an annual assessment in the amount determined by the Executive Committee. Members failing to pay all NAIC assessments on a timely basis will be placed in an inactive status.

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Types of Insurers

Unlock the world of insurers with our comprehensive guide. Explore the diverse landscape of insurance providers, from health and auto to life and beyond. Stay informed about the latest industry trends, coverage options, and tips for choosing the right insurer. Whether you’re seeking protection for your health, assets, or loved ones, our resource empowers you with the knowledge to make informed decisions. Navigate the insurance market confidently and secure the coverage you need for a resilient future. Explore insurers and optimize your protection today!

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