by Ed Sneineh, Illinois Insurance Agent
Insurance Navy, 300 N LaSalle St, Sute 4925, Chicago, IL. 60654
Illinois Insurance Codes identify three types of insurance companies. They include Domestic Companies, Foreign Companies and Alien Insurance Companies. This article is to offer brief description of each type.
Domestic Insurance Companies are business entities that have been are domiciled in the state of Illinois. Domestic insurance companies can be either Stock Companies or Mutual Companies, and each type is subject to slightly different capital and reporting requirements per the law. The main difference between Mutual Insurers and Stock Insurers lies in the nature of owning shares. In the case of Stock Insurers, any investor who has the money may purchase stocks of that company in the financial markets, hence becoming an owner with certain rights to vote for the Board of Directors of that insurer. The Board of Director, in this case, is usually aiming at maximizing the networth (short and long term profit of the investor shareholders).
Mutual insurance companies have shares that are owned by the insured people. Although they may offer bonds and certain types of preferred stocks that are debt in nature, people who own the mutual insurers are the actual insured people, who also posses the right to elect the Board of Directors. In this case, the Board of Directors will normally aim at making the insured people happy, by maximizing their dividends (return of premiums, indeed.) There are different tax treatment for 'profit' received by the shareholders from sock companies and mutual companies.Many famous insurers stated as mutual companies and converted later to stock companies for several legal and financial considerations. The State of Illinois insurance codes, like in all other states, have provisions that mandate the processes and procedures for the conversion, subject to the State of Illinois Statute.
The State of Illinois Insurance Code identifies two other companies, Foreign and Alien Insurers. Foreign Insurance Companies are those domiciled in another state of the United States but are doing business in Illinois. Alien Insurance Companies are insurers operating in Illinois that are domiciled in a foreign country. Illinois insurance codes set certain requirements for both foreign and alien companies in issues related to the offering that these companies can present to their Illinois customers, capital requirements, as well as compliance requirement with the Illinois Insurance Code.
Admitted Vs Non Admitted Insurers. Insurance companies that have their market conducts, rates, and policy forms monitored or approved by the Illinois legislators are referred to as 'Admitted Insurers.' Normally these companies contribute to a state sponsored guaranty fund which will provide help to the insured people in the event that one of these companies go bankrupt, hence cannot pay claims. Non admitted Insurers refer to insurance companies that do not have their rates, conducts, or policy form subject to insurance regulators, and their is no rule for the guaranty fund in supporting the public claims for any insolvent insurer. Non admitted insurers are normally not unable to get their license in Illinois, but rather they choose to operate on as unlicensed, 'surplus line' insurers because this gives them more flexibility.
Surplus lines Insurance policies sold in Illinois from unauthorized insurers, other than domestic surplus line insurance companies, must have imprinted on the first page thereof in not less than 12-pt. bold font the following statement:
"Notice to Policyholder: This contract is issued, pursuant to Section 445 of the Illinois Insurance Code, by a company not authorized and licensed to transact business in Illinois and as such is not covered by the Illinois Insurance Guaranty Fund."
Insurance policies issued this section from domestic surplus line insurance companies as defined in Section 445a shall have the following legend printed on the first page of the policy:
"Notice to Policyholder: This contract is issued by a domestic surplus line insurer, as defined in Section 445a of the Illinois Insurance Code, pursuant to Section 445, and as such is not covered by the Illinois Insurance Guaranty Fund."