Residual Markets

Question 1

voluntary market insurance restrictions for high risk drivers (4)

Answer 1

• coverage amounts limited to compulsory levels
• higher deductibles
• higher premiums than for average drivers
• encourage responsible driving through safe driver insurance plans (SDIPs)

Question 2

residual market programs for high-risk drivers (4)

Answer 2

• assigned risk
• joint underwriting associations (JUAs)
• reinsurance facilities
• Maryland state fund

Question 3

describe assigned risk plans for high-risk drivers

Answer 3

• all auto insurers in the state are assigned a proportionate share of high-risk drivers
• policies are handled by the assigned insurer, and premium and losses stay with that insurer

Question 4

describe JUAs for high-risk drivers

Answer 4

• all auto insurers in the state are assessed a proportionate share of losses and expenses
• policies are handled by one or more designated servicing insurers
• JUA sets rates and approves policy forms

Question 5

describe reinsurance facilities for high-risk drivers

Answer 5

• insurers accept all applicants but have option of assigning premiums and losses to a reinsurance pool
• all auto insurers share losses and expenses of the reinsurance facility in proportion to market share

Question 6

describe Maryland Auto Insurance Fund

Answer 6

• policies are handled by a state fund, subsidized by all auto insurers

Question 7

types of uninsurable properties under FAIR plans (5)

Answer 7

• vacant or open to trespass
• poorly maintained or has unrepaired fire damage
• unacceptable physical hazards
• violates law or public policy
• not built in accordance with building and safety codes

Question 8

main candidates for FAIR plans (3)

Answer 8

• urban properties susceptible to riot and civil commotion
• homes in hazardous brush areas
• coastal properties exposed to windstorm damage

Question 9

eligibility requirements for FAIR plans (2)

Answer 9

• unable to get voluntary market coverage

* inspection by FAIR plan administrator

Question 10

eligibility requirements for state beachfront and windstorm plans (3)

Answer 10

• unable to get voluntary market coverage
• located in designated coastal areas
• properties constructed after a certain date must conform to building codes

Question 11

justification for auto residual market (2)

Answer 11

• auto insurance in compulsory, so coverage should be available and affordable
• societal benefit to having fewer uninsured drivers

Question 12

describe difference in condition (DIC) policy

Answer 12

most FAIR plans only provide coverage for certain perils, so a specialty insurer may offer DIC policy to bridge coverage gap