Unauthorized Insurer: What it is and Why it's Unlawful

Unauthorized insurer is an insurance company that is operating without the permission or oversight of its state insurance regulator. This means that the insurer is conducting business without the approval or supervision of the insurance regulator, a breach of the law.

For the purchase of insurance to be legally binding, the insurance company must have the permission of the regulator, who will also check the policy’s authenticity and legality, ensuring the customer is getting what they pay for. Without permission, an insurer has not been properly vetted, leaving customers vulnerable and making it difficult to trust the policy.

Operating an unauthorized insurer is illegal, and individuals engaging in it or those working with the company can face legal and financial penalties. Insurers found to be working illegally can face significant fines and may even result in the revocation of any existing licenses they may have.

Any customers who find out they have purchased a policy from an unauthorized insurer have the right to compensation from the professionals who sold them the product. The Financial Ombudsman Service has the authority to investigate cases and make decisions regarding compensation if the customer has been given an inferior product or even in some cases if no product has been delivered.

Furthermore, customers of unauthorized insurers may not be able to make a claim if necessary. Insurance companies are protected by a variety of statutes and laws, and without the approval of a regulator, an insurer’s contracts may not be protected in the courts of law.

Taking out insurance is an important part of managing risk, protecting yourself from financial losses, and safeguarding against unexpected events. As critical as its purpose is, every customer should be aware of the risks associated with purchasing policies from unauthorized insurers. To make sure you're getting the right coverage, always research the company and make sure they have been certified and approved by the insurance regulator.