What Are the Different Types of Insurance Companies?
When you start buying insurance and considering your options for purchasing insurance policies, you can get multiple insurance quotes for your coverage from different types of insurance companies. If you know what kind of insurance company you’re dealing with, you’ll know better if you’re getting the best value from your insurance policy.
Several types of insurance companies include standard lines, excess lines, prisoners of war, direct sellers, domestic, alien, mutual companies, joint-stock companies, and Lloyds of London. Below is a brief description of each of these different types of insurance companies, as well as the specific special risks and other unique characteristics insured.
Standard line carriers, as their name implies, are used a lot. It is an insurance company that has a license to operate and sell certain lines of insurance in certain states. Another word for a standard line operator is “licensed operator.” Charges applied to standard line operators are regulated by the applicable state or state insurance board. These approved airlines are also subject to the laws and restrictions of the state with which they are licensed to operate.
Standard line operators must contribute to the state guarantee fund. This guarantee fund pays the bills presented if the insurance company goes bankrupt.
Another name for excess line insurance company is “surplus line” company. These types of companies primarily cover special risks, such as high-risk auto insurance or high-risk individuals, that standard line carriers cannot apply due to insurance guidelines or restrictions. An example is a company that has many speeding tickets or other traffic violations or has just opened and has no prior compensation.
Prisoner insurance companies are companies that generally cover certain types of risks for a specific industry or group of individuals, such as transportation (transport insurance) and vehicle insurance. For example, if a shipping company can’t find cheap insurance through the standard insurance market, insurance companies can offer their own insurance. Companies established to provide insurance are “captives” of their parent companies.
Direct selling companies are companies that sell directly to insurance consumers without using an insurance agent. Most of these direct selling companies have company representatives and local offices, but most of the business is done online or over the phone. Since direct sellers do not use local agents, policyholders must cite the company directly to cite the policy, purchase and handle the necessary changes to the policy. A decisive factor in using a direct insurance writer is whether the insurance client is comfortable dealing directly with the insurance company, or whether they prefer the services of a local independent insurance agent. A well-known direct writer insurance company is GEICO.
You have been driving and licensed in the state where your domestic insurance company resides. The company is licensed to do business in another state, but is considered alien in that state.
Alien insurance companies are established under the laws of other countries. For example, an insurance company founded as an American company but operating in France is considered an alien carrier from a French point of view.
Lloyd of London
The Lloyds of London specializes in ensuring unusual or high-risk items and are approved by the British Parliament. Although risks are rare, such as celebrity body parts or offshore oil risks, “main street” or more general types of risks are also covered.
Mutual companies are actually considered shareholders and are owned by policyholders who can receive dividend payment distributions, and may not be penalized for higher premiums due to losses. It may vary from company to company. A well-known mutual company is Liberty Mutual.
Corporations and further classification
A joint stock company is a company with shareholders and distributes excess income to the shareholders as dividends. In addition, a company can be classified as a “single shipping company”, it can be classified as a “multi-line company” that writes only one coverage or policy for multiple types of insurance.
What it means to you
When choosing to buy insurance, you may decide to purchase an insurance policy from an agent representing a captive company (e.g. State Farm). Or through an independent agent representing many companies. You can also choose to purchase insurance policies online or directly from sellers (eg GEICO) via phone. Knowing a little more about the different types of insurance is another tool you can use to find the best value when purchasing a policy.