What characteristic makes surplus lines insurance different from traditional insurance?

Surplus lines insurance is distinct from traditional insurance primarily because it operates without adhering to the same regulations that govern admitted insurers. Admitted insurers are those that are licensed and regulated by state insurance departments, which must follow specific rules for rates, policy forms, and consumer protections. In contrast, surplus lines insurers provide coverage for risks that are not typically covered by conventional insurers, often due to their unusual or high-risk nature. Because surplus lines insurance is not subject to the same stringent regulations, it allows for greater flexibility in terms of pricing and policy structure. This characteristic enables these insurers to offer coverage where admitted markets would not, making them a vital resource for certain types of risks or specialized coverage needs.

The other options reflect misconceptions about surplus lines insurance. It does not exclusively involve government entities, does not automatically mean that coverage will always be more expensive, and while there may be some requirements for securing surplus lines coverage, it does not necessitate a lengthy approval process like some other types of insurance may.