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Classifying Insurance Companies

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Key Takeaways
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"Insurance company," "insurance carrier," and "insurer" all refer to the same thing: the organization that accepts risk in exchange for a premium. Before looking at the many specific forms these organizations take, it helps to see the big picture of how they are classified.

Terminology

The organization that accepts the risk is the insurer. The person or business whose risk is covered is the insured.

Two Broad Categories of Insurers

Every organization that sells insurance in the United States falls into one of two broad categories: privately owned commercial insurers, or government entities that provide what is commonly called social insurance.

  • Private (commercial) insurers — owned by private investors, policyholders, or members, and operated to serve a private market.
  • Government (social) insurers — owned and operated by a federal or state agency, and generally created to meet a public need the private market does not fully address.

Multiline and Monoline Insurers

Within the private market, insurers are also described by how many lines of business they write. A company that sells more than one line of insurance — for example, both life and health, or both property and casualty — is a multiline insurer. A company that sells only one line, such as only life insurance, is a monoline insurer.

The rest of this chapter walks through the specific legal and organizational forms private insurers can take, before turning to the role government plays as an insurer in its own right.


Key Takeaways
  • Insurer, insurance carrier, and insurance company are interchangeable terms for the risk-bearing party; the insured is the party whose risk is covered.
  • Insurers are classified as either private (commercial) or government (social) entities.
  • A multiline insurer writes more than one line of insurance; a monoline insurer writes only one.