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Voluntary market characteristics

Limiting coverage (compliance level)
Limited medical payments coverage
High deductibles for collision
Significantly higher premium


Residual Market Programs

Automobile insurance plans


Automobile Insurance Plans (Assigned Risk Plan)

All auto insurers in a state assigned portion of high risk drivers based on market share


Assigned Risk Plan characteristics

Demonstrate unable to obtain insurance within certain number of days
Minimum limits of insurance offered at least equal to compulsory requirement
Ineligibiles (no license, felony within 36 months, habitual violators)


Joint Underwriting Association

Uses servicing insurers; Agents/brokers submit applications to JUA or servicing insurer. JUA sets rate and approves form


Difference between Assigned Risk and JUA

JUA shares losses amongst pool; servicing insurers compensated for service based on proportion of market share


Reinsurance facilities for high risk drivers

Insurers accept all applicants with license
If insurer does not wish to retain, can assign to reinsurance facility while continuing to service it
Losses shared by market share


Maryland state fund

Insures high risk drivers
Private insurers subsidize losses and charge surcharge to own insureds


Automobile insurance rate regulation

Purchasing insurance a right, not a privilege
Desire of companies to make profit conflicts with perceived right


FAIR Plans

Provides coverage when insurers in voluntary market cannot offer coverage at reasonable rate
Candidates tend to be susceptible to damage caused by riots and civil commotion
Must apply through authorized agent or broker


Policy issuing syndicate

FAIR plan -- issues policies, staff handle UW, processing, claims handling


Servicing organization in FAIR

Voluntary insurers handle maintenance of contract, and perform services in return for portion of premium


FAIR plan qualifications

Property must be ineligible in voluntary market and inspected by FAIR plan administrator
Must meet certain basic safety levels under conditions under owner's control (ex: fireworks factory as neighbor)


Uninsurable properties under FAIR

Vacant / open to trespass
Poorly maintained / unrepaired fire damage
Subject to unacceptable physical hazards
Violates law of public building
Not built in accordance with building and safety codes


Difference in condition policy

More coverage than FAIR plan (limited number of perils such as vandalism, riot, windstorm)


Beachfront and Windstorm Plan eligibility

Must be ineligible for voluntary coverage
Must be located in designated coastal areas (some states -- within certain distance from shore)
Mobile homes may be eligible if they meet certain construction / tie-down requirements


Uninsurable properties under Beachfront and Windstorm Plan

Poorly maintained
Unrepaired damage
Subject to poor housekeeping
Violate law or public policy