It is a regulated segment of the auto market where carriers file rates specifically for records standard companies decline: multiple violations, at-fault accidents, coverage lapses, and filing requirements. It is real insurance, priced for a different risk.
More detail
The word nonstandard describes the underwriting appetite, not the quality of the coverage. These carriers file rates with the state insurance regulator the same way standard carriers do, pay claims the same way, and are subject to the same market conduct rules. What differs is who they will write. A standard carrier declines a record with a recent DUI because that record does not fit its loss model; a nonstandard carrier accepts it and prices it. For a driver whose record has just changed, that is the difference between insurable and not. Two expectations worth setting: premiums in this segment are higher because the expected losses are higher, and the segment is where the spread between carriers on the same record is widest, which is why comparison is worth the effort here specifically.