assigned risk vs voluntary

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Assigned Risk: What It Is, How It Works

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

What Is Assigned Risk?

Assigned risk is when an insurance company is required, by state insurance law, to provide coverage for risk that may not find coverage in the general insurance marketplace. In order to compensate insurers for the potential losses associated with such mandated coverage, insurers will often pool funds and share the assigned risk.

Common examples include mandating that all drivers obtain car insurance or requiring businesses to purchase workers' compensation insurance.

Key Takeaways

• Assigned risk is when the law mandates that an insurance company offer certain coverages.
• In such cases, regulators will require insurance companies to pool together and accept the assigned risk, even if the insurers individually don’t want to provide a commercial policy.
• Assigned risk allows the state to protect drivers who are able to purchase commercial policies and who may be involved in an accident with a risky driver.

Understanding Assigned Risk

In most cases, insurance companies choose who they underwrite insurance policies for, and this choice to insure is based on the risk profile of the individual or business applying for coverage. These considerations include the likelihood that a claim that results in a loss for the insurance company. The insurer will thus price the cost of the policy it underwrites according to the potential severity of any losses. If a potential insured is deemed too risky, the insurer may not underwrite a new policy.

State insurance regulators recognize that insurers only want to underwrite policies that will be profitable, but also recognize that it is in the interest of the government that coverage is extended to groups that need protection but may not be able to obtain it in the general insurance market. To do this the regulator will require insurance companies that provide a particular line of insurance, such as workers’ compensation or automotive insurance, to participate in a state-sponsored plan that provides coverage.

Example: Motorist Coverage

For example, drivers are required to carry insurance with them in order to legally operate an automobile. This insurance is designed to cover claims made against the driver. In most cases, the driver’s record is in good shape, and insurers are likely to provide coverage.

Some drivers, however, have poor driving records and may not be able to obtain coverage because they present too much of a risk . Insurance regulators will require insurance companies to pool together and accept the assigned risk, even if the insurers don’t want to provide a commercial policy . This allows the state to protect drivers who are able to purchase commercial policies and who may be involved in an accident with a risky driver.

"In some cases, you can apply to an automobile insurance plan or assigned risk plan by directly contacting your state's Department of Insurance," according to the website DMV.org, a private, non-governmental website:

Some states require that you apply to several car insurance companies before you apply for the state's car insurance plan. If each provider has denied you car insurance coverage, you'll be accepted into the plan. Typically, your signature on the application is enough to acknowledge that you have fulfilled this requirement.

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Workers Compensation Assigned Risk Plans

Assigned Risk Plans Are the Market of Last Resort

What Is an Assigned Risk Plan?

• Why Workers Comp May Be Hard to Get
• Who Administers the Plan?

How Can You Get Coverage?

Pros and cons of assigned risk plans.

Suppose you try to purchase a workers compensation policy  in the standard market but no insurer will sell you a policy. This will create a dilemma since most states require employers to purchase workers compensation insurance. Fortunately, you'll have an alternative: You can secure coverage from your state's assigned risk plan .

Assigned risk plans are established by the states as a safety net for employers that are unable to obtain workers compensation coverage from "regular" insurers. They are the market of last resort for employers that would otherwise have no source of coverage. All states except monopolistic states have established a plan.   The law in each state determines how the plan is administered and financed. Assigned risk plans are also called the residual market.

The monopolistic states don't need assigned risk plans because all employers in those states are required to secure workers comp insurance from a government-operated fund.

States have created assigned risk plans so that all employers can obtain workers compensation insurance. The ultimate goal is to ensure that employees who are injured on the job will receive the benefits entitled to them by law.

Why Might Workers Comp Coverage be Hard to Obtain?

Here are some reasons why an employer may have difficulty obtaining workers compensation insurance from a standard insurer:

• Poor loss history : If a business has sustained many small losses or a few large ones, underwriters may assume its management doesn't care about safety.
• New business : A new company is difficult for an underwriter to assess because it has no track record.
• Very small business : A very small company may not generate enough premium to compensate for the risk of claims.
• Hazardous occupation : Many insurers are unwilling to provide workers compensation coverage to employers in risky occupations like logging, trucking, and roofing.

Who Administers the Assigned Risk Plan?

All states have designated an administrator that operates the plan and oversees the issuance of policies. In most states, the administrator is one of the following:  

• The National Council on Compensation Insurance (NCCI)
• The state competitive insurance fund
• The state rating organization or another third party

The NCCI administers plans on behalf of 22 jurisdictions.   Each of these states requires all workers compensation insurers that operate within its borders to participate in the assigned risk plan. Insurers may either join a multi-state reinsurance pool or serve as a "direct assignment" carrier. When an insurer participates in a pooling arrangement, it may act as a servicing carrier (issuing policies and paying claims) or provide reinsurance to servicing carriers. If an insurer chooses the direct assignment option, it must agree to accept and retain all risks assigned by the NCCI. The direct assignment insurer pays all losses incurred by the assigned employers and is not reimbursed by reinsurance.

In 14 states, the assigned risk plan is administered by the state competitive fund. Examples are California, New York, and Montana. Most of the remaining states have designated their rating organization or an insurer as their plan administrator.  

If you or your insurance agent is unable to secure workers compensation coverage for your business in the standard market, you or your agent may submit an application to your state's assigned risk plan administrator. The application procedure varies by state. If the plan in your state is administered by the NCCI, you can apply online 24 hours a day or mail your application to the NCCI via the U.S. Postal Service.

If the plan in your state is administered by a state fund or rating organization, check the administrator's website for application instructions.

To obtain coverage in the residual market, you must have applied for coverage and been rejected by one or more insurers. The number of required rejections varies by state. For instance, employers in West Virginia can apply for coverage in the assigned risk plan only if they provide evidence of rejection by two insurers.  

The primary advantage of an assigned risk plan is that it provides coverage to employers that can't obtain insurance in the standard market. One major disadvantage is cost. Employers insured in the residual market generally pay higher rates than those insured in the voluntary market. Those whose experience modifier is greater than 1.0 may also be subject to a surcharge.   In addition, some states have eliminated the premium discount on assigned risk policies. An example is Massachusetts.   A premium discount is a credit applied when the premium exceeds a certain threshold.

Another drawback of assigned risk plans is that employers can't choose their insurer. Their policy is issued and managed by the plan administrator or servicing carrier. A third disadvantage is limited coverage. Policies issued in the residual market may not be as broad as those purchased from standard insurers. For instance, many policies afford no coverage for operations the employer undertakes in states other than the one where the policy was issued.  

Key Takeaways

• Assigned risk plans serve employers that can't find workers comp coverage in the standard market.
• Most plans are administered by the NCCI, a state insurance fund, or a state rating agency.
• Policies purchased from an assigned risk plan are generally more expensive and provide less coverage than policies obtained in the standard market.

IRMI. " Assigned Risk Plans ." Accessed July 30, 2020.

IRMI. " Workers Compensation Residual Market ." Accessed July 29, 2020.

NCCI. " Insuring the Uninsurable. Workers Compensation Residual Market ." Accessed July 29, 2020.

NCCI. " Options for Submitting Assigned Risk Applications Online ." Accessed July 29, 2020.

State of West Virginia, Offices of the Insurance Commissioner. " Workers’ Compensation Assigned Risk Plan ," Page 2. Accessed July 29, 2020.

NCCI. " Assigned Risk Adjustment Program ." Accessed July 30, 2020.

The Workers Compensation Rating and Inspection Bureau of Massachusetts. " Premium Discount ." Accessed July 31, 2020.

NCCI. " Producers' Guide to Understanding NCCI's Residual Market Limited Other States Insurance Endorsement ." Accessed July 30, 2020.

What Is The Assigned Risk Pool, and Why Are You In It?

Being a commercial lines insurance agent at Viking Insurance Services, I inherently speak with a lot of business owners on a daily basis. As a commercial lines insurance agency specializing in bringing clients out of the workers compensation assigned risk pool, a lot of those business owners are in their state workers compensation risk pool. Roughly half of the clients I speak with don’t know that they are in the assigned risk pool, and/or have no idea what it is. Even fewer know the actual reason they are in the pool to begin with.

So, What is the assigned risk pool?

The IRMI (International Risk Management Institute) defines the assigned risk pool as “a method of providing insurance required by state insurance codes for those risks that are unacceptable in the normal insurance market.” In plain English that just means that it is meant to be a market of last resort for high risk policies, where the insured has not received voluntary offers directly from insurance carriers.

Depending on a number of factors, your business may not be an acceptable risk to standard carriers. Your agent may be submitting dozens of applications, and receiving declination after declination. In that event, you are fortunate to have access to workers compensation coverage through the state risk pool. Without it, you simply would not have access to coverage for work related injuries your employees may sustain.

The being said, more often than not, the clients I speak with have no business being in the assigned risk pool.

Different states, different rules

Each state has its own workers compensation risk pool. While many states use an organization called NCCI to administer their workers compensation program, there are some who administer their own program, as well as North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the U.S. Virgin Islands which are monopolistic funds.

The rules and requirements vary from state to state, especially when comparing NCCI administered states to independent and/or monopolistic states. It is always a good idea to speak with your agent if you have questions, or check with your local governing body. We have listed links at the very bottom of this page to many of the state insurance commission websites.

Why are the rates so high in the assigned risk pool?

This is a question I get asked all the time. The answer is really pretty straight forward: The assigned risk pool is meant to be a market of last resort for high risk companies, therefore the businesses who are in the assigned risk pool /SHOULD/ all be high risk operations. That being the case, the rates are meant to be commensurate with the risk the insurance companies are taking in insuring this group of high risk policies.

Rates vary from state to state, but in general it is safe to assume that the rates in the pool are the highest available for most workers compensation class codes. In fact, many standard voluntary market carriers use the assigned risk pool rates as a basis to discount their rates against.

Should you really be in the assigned risk pool?

The answer to the above question is often no. There are dozens of workers compensation insurance carriers in the United States, and all of their underwriting appetites are different. What would be a decline for many, may be what another specializes in.

For example, General Contractors are a very difficult class of business to write workers compensation for. There are very few carriers who are willing to write policies when more than 25% of the labor is subcontracted, let alone 75-85% of their labor being subcontracted as is standard with GC’s. That is not to say that you should be in the assigned risk pool though, because there are carriers who specifically write coverage for these types of operations.

Here are a few other common misconceptions on why an account is in the pool:

• Less than three years prior coverage
• High risk occupations such as roofing contractors and arborists
• History of previous claims or losses
• High employee turnover rate

The above reasons are mostly untrue. We write new businesses, with zero prior coverage, in standard voluntary markets every day. Just because you have had some claims doesn’t knock you out either. There are many carriers who will consider offering coverage for accounts with prior losses, and there are even carriers who prefer to write these harder to place risks. We also have carriers who like to write roofers, tree crews, and even cell phone tower installers. With regards to employee turnover, I am asked that question a handful of times out of hundreds of applications.

In reality, the most common reason I come across in dealing with companies who are in the assigned risk pool is that they are dealing with a captive agent. That is probably a term you have never heard before, but what is means is that they are only allowed to write business with one carrier. Examples of captive agents would be Nationwide, Allstate, State Farm, Farmers, etc. So, if you call your local captive agent and ask them to quote your business insurance, the only company they are able to offer quotes with is the one company they work for. What if that company doesn’t write workers compensation in your state, or they don’t write your class of business? You end up in the assigned risk pool.

Alternatively, independent insurance agencies are able to be contracted with various insurance companies. This gives independent agencies the ability to hunt for the best coverage, at the best price, with many different carriers. For more information on why an independent agent is the right choice for you business, check out this article.

Here are some valid reasons to be in the assigned risk pool:

• Experience modifier above a 1.3 to 1.5
• Major claim within the past two years, often in excess of $100k
• Paying employees 1099 when they should really be W2
• Low payroll or no payroll, generally below about $20K annual payroll is tough to place

Save money on your workers compensation by getting out of the pool

As I mentioned above we specialize in bringing clients out of the assigned risk pool. On average we are able to reduce the rate you are paying for your workers compensation coverage by 30-50% by obtaining coverage in the voluntary market. Despite the amount of payroll you are running, and the class code your labor falls under, the savings are almost always substantial.

In addition, the way you pay for your policy will likely change dramatically as well. With assigned risk pool policies insureds are generally required to pay either the entire annual premium or at least a 50% down payment. When coverage is secured in the voluntary market, carriers generally only require 10% down with ten equal monthly payments. There are also “pay-as-you-go “ options which require an even smaller down payment, and give the ability to report payroll on a monthly basis, paying only for what is actually used. Another perk of the latter option is that the carrier generally eliminates the annual audit since the payroll has been reporting monthly.

How to know if you are in the assigned risk pool

If you don’t know if your business is in the assigned risk pool, there are a few ways to figure it out.

First and foremost, just ask you agent! This should not be a secret, and if your agent has withheld this information from you…you need a new agent. If you are absolutely married to your agent because you have been with them for years and when you think about making a change you are left thinking “I wish I knew how to quit you,” something amazing will likely happen when you ask your agent if you are in the assigned risk pool. Nine times out of ten they are going to miraculously come back with a substantially better price for your renewal. If you would like to know WHY that is going to happen, read this little article about the _*types of insurance agents*_ out there.

The second option is to simply give us a call. Our agency, Viking Insurance Services, has access to the full list of all businesses currently in the assigned risk pool in the states we operate in. In a matter of about 5 minutes we can determine whether you are in the assigned risk pool, tell you if we think we can get you out, and give you an idea of what the rates will look like if we are successful.

The bottom line

The bottom line is that many of the businesses we speak with do not belong in the assigned risk pool and are paying significantly more than they should be for their workers compensation coverage.

We know your time is valuable, which is why we have streamlined our processes to take up as little of it as humanly possible. That said, I propose the following question: Would saving even 15% on your workers compensation premiums be worth a total of 10-15 minutes of your time?

Then what are you waiting for? Give us a call today to find out what Viking Insurance Services can do for you.

As promised, here are the links to your states insurance commission’s website:

Georgia State Board of Workers’ Compensation

North Carolina NC Industrial Commission Information for Employers

South Carolina SC Workers Compensation Commission

Virginia Employers | Virginia Workers’ Compensation Commission

TN Injuries at Work

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Assigned Risk Vs. Voluntary Market: Insurance (Debunked)

• by Team Experts
• July 2, 2023 July 3, 2023

Discover the Surprising Truth About Assigned Risk and Voluntary Market Insurance – Debunked in One Post!

How do Premium Rates Compare in Assigned Risk vs Voluntary Market Insurance?

How does state mandated coverage differ in assigned risk and voluntary market insurance, what factors affect insurance carrier selection for assigned risk and voluntary market policies, how do financial stability ratings impact your choice of insurance provider in the assigned risk or voluntary market, how do consumer protection laws apply to both types of insurance markets, common mistakes and misconceptions.

Overall, financial stability ratings can provide valuable insight into an insurance provider’s ability to meet its obligations and manage risks. However, it is important to consider multiple factors beyond just the rating, such as solvency ratio, underwriting profitability, claims payment history, investment portfolio quality, reinsurance protection, regulatory compliance, customer satisfaction, risk management practices, capital adequacy, and loss reserves. By evaluating these factors, individuals can make informed decisions when choosing an insurance provider in the assigned risk or voluntary market.

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Denied Car Insurance? Hope Floats in the Assigned-Risk Pool

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If your driving history is full of transgressions, finding a company that'll sell you a car insurance policy can be difficult.

A couple infractions could cause higher rates, but rack up too many serious convictions or tickets and insurers may prefer not to get involved with you at all. This creates big problems if you own a car and lack the insurance required in your state.

If your application for auto insurance is denied, entering the state assigned-risk pool may be the only way to get the coverage you need to drive legally.

Here’s a look at what car insurance assigned-risk pools are and how to know when it’s time to jump in.

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What is an assigned-risk car insurance pool?

Drivers who are deemed too risky may be unable to buy car insurance on the private market. But they still need coverage by law if they own vehicles, so states assign them to insurance companies that operate in the state. This grouping is known as the “assigned-risk pool,” “residual market” or “shared market.” Sometimes it’s called the joint underwriting association.

What problems put drivers in the assigned-risk pool?

Each state has its own eligibility rules for the assigned-risk pool.

Typically, if you've tried to buy auto insurance in the past 60 days and were turned down, you can apply to your state’s assigned-risk pool. Some states may require that you be turned down more than once.

Reasons you may be denied car insurance include:

Major driving convictions (DUI or DWI, hit-and-run)

Multiple accidents, tickets or claims on your driving record

Having little or no driving experience

Insurance prices and coverage options for assigned-risk drivers

Expect your auto insurance premiums to be substantially higher in the assigned-risk pool. Your policy options also may be limited to the state minimum liability requirements. Some states may allow you to earn a discount on your assigned-risk pool insurance plan after a certain amount of time with no accidents or driving convictions.

How to find your state’s assigned-risk pool

Generally, any car insurance agent in your state can help you with an assigned-risk policy. You may be asked to prove, declare or certify that you have no other options for buying insurance, depending on the state.

» MORE: What does car insurance cover?

How to get out of the assigned-risk pool

States require insurers to renew assigned-risk pool policies for a set amount of time, generally three years. Assuming you pay your premiums and your driving record stays clean during your pool time, you'll likely qualify for a regular policy by then. If you don't, you can reapply to the assigned-risk pool.

You may be able to climb out of the pool faster if:

You find an insurance company that is willing to sell you a standard policy

Your assigned-risk pool insurer offers you a traditional policy

» MORE: Best car insurance companies for high-risk drivers

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What is the Assigned Risk Workers’ Compensation Pool?

Sports make great analogies:.

For a large number of athletes that want to play sports after middle school, high school or college –  intramural leagues offer a great opportunity. Intramural leagues accept all kinds of athletes: new athletes, old athletes, good athletes, bad athletes, etc. Conversely, people who are talented and want to continue to play sports AND are lucky enough to make it pro have a whole different set of options available to continue playing sports.

Intramural leagues accept all participants and normally have a fee to play. The fee pays for field time, referees, equipment, etc. On the other hand, professional sports pay players to compete. Just as there are two levels in sports: intramural and professional, there are two “levels” of workers’ compensation insurance in the market place: 1) the intramural version is the assigned risk pool where all applicants are accepted and applicants pay more money than option 2) the professional sports version. The pro version is where insurance companies are picky with who they offer insurance to. Although the insurance companies won’t pay you to have workers’ compensation coverage, the coverage in the professional version is much less expensive than the intermural sports version.

For the amount of risk insurance companies take on, they are extremely risk-averse.

Workers’ compensation is federally mandated. What does a company do when they can’t purchase workers’ compensation in the preferred or voluntary market? They turn to the assigned risk workers’ compensation market. It is the market for new in-business and high-risk business operations. All applicants are accepted in the pool.

The pool is a collection of insurance companies that each state requires insurance companies to take part in. The insurance companies in the pool don’t want to be in the pool. They get out as soon as they can, only to have another insurance company replace them. Insurance companies take turns providing insurance to the pool.

Reasons to be in the pool:

• New in business. Without a proven track record, how do you prove you are a claims-free safe company?
• Risky business operations i.e. roofers or tree trimmers. There is an exception to this – when a risky operation becomes large enough there are voluntary markets that are willing to write their workers’ compensation. Companies that are large enough, have enough premium to support claims.
• Ghost policies aka “if any” policies aka no payroll or zero payroll policies. This is common for businesses without employees, whose clients require workers’ compensation on a certificate.
• An experience modifier that is out of control – when a company has too many claims.

As mentioned, insurance companies do not want to be in the assigned risk workers’ compensation pool. They do not know what kind of businesses they will have assigned to them to insure. Well…the pool plans for this and charges anywhere from 30% to 40% more than preferred or voluntary insurance companies. Likewise, the insurance companies in the pool take their time processing changes. They provide the least amount of personal service possible. They begrudgingly operate in the pool.

It’s important to work with your advisor to understand why you are in the pool and what you can do to improve your situation. sometimes the pool is your best option. other times, it is not. check out konen’s interactive graphic to learn more about workers’ compensation coverage: here, join our newsletter.

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Assigned Risk Auto Insurance: A Guide for Drivers with Bad Credit

What is an assigned-risk car insurance pool, what problems put drivers in the assigned-risk pool, how to get an assigned risk plan, what are coverage options for assigned-risk drivers, frequently asked questions.

A few violations could result in increased rates, but if you accumulate too many major convictions or citations, your insurer might decide not to work with you at all. If you possess a car but don’t have auto insurance your state requires, this creates serious issues. It may be difficult to find a firm willing to give you car insurance coverage if your driving record is full of infractions

Entering the state-assigned-risk pool may be the only option to obtain the coverage you require to legally operate a vehicle if your auto insurance application is rejected

Here’s a look at assigned-risk pools for auto insurance and how to decide whether to join one.

Car owners must have a minimum amount of liability insurance in every state. However, the typical insurance market, often referred to as the voluntary market, has the right to reject coverage to drivers if it believes to have too many risk factors, such as a lack of expertise behind the wheel or poor driving history.

We know that not everyone can understand the complex terms in the auto insurance glossary . That is why we have tried to explain it in easy terms; States have developed assigned risk plans, which offer coverage through a pool of insurance firms, to address the insurance needs of drivers who have been declined by insurers. These schemes make it possible for automobile owners to obtain insurance, although assigned risk plans have far higher rates than voluntary market policies.

For the assigned-risk pool, each state has its own qualifying requirements.

Typically, you can apply to your state’s assigned risk pool if you’ve recently tried to get vehicle insurance but were rejected. You might need to be rejected more than once in some states.

You could be refused auto insurance for the following reasons:

• If you have a hit-and-run on your record
• You have no driving experience
• If you DUIs or DWIs
• The area where you live and drive has a record of too many thefts and vandalism
• Your driving record contains a number of accidents, violations, or claims.

Here are some general steps to getting an assigned risk auto insurance plan, while the particular procedure may differ based on your location:

• Contacting insurance companies: Make contact with local insurance providers and ask about their assigned risk policies. You might look for high-risk car insurance companies or unusual insurance plans.
• Submit useful information: Be ready to submit pertinent information about your driving history, including any accidents , moving infractions, or license suspensions, when applying for an assigned risk auto insurance plan. Based on this data, insurance firms will determine your degree of risk
• Fill out the application: Fill out the application for assigned risk auto insurance that the insurance provider provides. The application may ask for personal data, information about your car, and facts on your driving history.
• Pay the Premium: Due to the higher risk involved, assigned-risk auto insurance policies sometimes have higher rates. The exact cost will vary depending on a number of variables, including your driving record, where you live, and the coverage choices you select.
• Wait for Approval: The insurance provider will analyze your information and decide if you qualify for the allocated risk plan once you submit your application and payment of the premium.
• Receive Insurance Coverage: Upon approval of your application, you will be sent a policy with the terms, conditions, and specifics of your assigned risk auto insurance.

Depending on the insurance provider and state laws, assigned-risk drivers may have access to a variety of coverage alternatives. The coverage possibilities provided by assigned-risk auto insurance plans are comparable to those of normal auto insurance policies, nevertheless. Here are a few popular types of insurance:

• Liability insurance
• Bodily Injury Coverage Insurance
• Uninsured/Underinsured Motorist Coverage
• Personal Injury Protection (PIP)
• Comprehensive Coverage
• Collision Coverage
• Towing and Labor Coverage

What do assign risk pools offer drivers?

States utilize assigned-risk pools, that offer insurance coverage to almost any motorist at a significantly higher cost. Insurance providers consent to be a part of these pools and to insure any motorist that the state designates for them.

Who needs an assigned risk pool auto insurance?

A driver who is getting rejection by standard car insurance companies needs an assigned risk pool insurance.

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Editorial Guidelines: The above is meant as general information to help you understand the different aspects of auto insurance. This information does not refer to any specific auto insurance policy. Coverages and other features vary between insurers, vary by state, and are not available in all states. References to costs of coverages/repair, average or typical premiums, amounts of losses, deductibles, etc., are indicative and may not apply to your situation. We encourage you to speak to our insurance representative and to read your policy contract to fully understand your coverages.

Randy Luton is the Founder and CEO of RateForce. He is passionate about InsurTech services and has in-depth knowledge about the auto insurance sector of the USA.

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Table of contents

• What is assigned risk?
• How it works
• Who qualifies?
• Standard insurance
• Leaving assigned risk

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Assigned risk auto insurance is an option for drivers who have trouble securing a standard car insurance policy, often due to a poor driving record, a low credit score, or because they live in an area at high risk of theft or vandalism. [1]

States establish assigned risk auto insurance programs and require private insurers to participate. Drivers get coverage by applying to their state’s risk pool, and the state assigns them an insurer. While insurers can’t deny eligible drivers coverage through this program, assigned risk car insurance policies aren’t cheap . [2]

Here’s what you need to know about assigned risk insurance, and why it’s important to compare rates from multiple companies before applying for assigned risk coverage.

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What is an assigned risk auto insurance pool?

An assigned risk auto insurance pool is a state-supervised insurance market for high-risk drivers who can’t secure private-market car insurance. These are also called shared insurance markets, as they spread the risk of these higher-risk drivers among various insurance companies in the state.

Drivers can apply for their state’s assigned risk pool, and the state will assign them to an insurance company that must provide them coverage.

Pros and cons of assigned risk car insurance

Guaranteed coverage: Assigned risk insurance guarantees all drivers can get state-minimum coverage — regardless of their driving record, credit score, driving history, or other factors.

Helps drivers comply with law: Most state laws require car insurance, and drivers who don’t have coverage can face fines or criminal charges.

Provides legal protection: Beyond ensuring drivers comply with the law, liability coverage also helps protect you if another driver sues you for damages or injuries.

More expensive rates: Because assigned risk insurance is for higher-risk drivers, premiums are more expensive on these policies than on traditional car insurance. [1]

No choice in insurer: The state assigns drivers participating insurers within the pool, so drivers can’t comparison shop for insurance .

Limited coverage: Assigned risk pools typically only offer the minimum coverage the state requires. Drivers may not have access to additional coverages for more protection.

How assigned risk car insurance works

To get assigned risk car insurance, find your state’s assigned risk insurance pool. For example, in Ohio, it’s the Ohio Automobile Insurance Plan (OAIP). High-risk drivers in New York can use the New York Automobile Insurance Plan (NYAIP) for coverage.

You’ll then apply for your state’s pool using an official application. You can often do this online or by contacting a certified insurance broker or agent within your state.

Once the state approves you for the assigned risk pool, it’ll match you with an insurance company. The insurer assesses your driving record, credit score, location, vehicle, and other factors to determine your policy’s rate. Your coverage amounts and any driving convictions will affect your costs. For example, Texas assigned risk plans require a 60% additional charge if you have a driving under the influence (DUI) conviction. [3]

Who qualifies for assigned risk auto insurance?

Assigned risk car insurance eligibility requirements vary by state. In some states, you may need to certify that you’ve applied for and been denied private market car insurance in a certain period. In others, you just may need to be a resident of the state, have your car registered there, and hold a valid state driver’s license.

You also must be up to date on your recent car insurance premiums. For example, in North Dakota, you’re ineligible if you have any late premiums in the past year.

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Factors that make a driver “high risk”.

Assigned risk insurance is for high-risk drivers, though this doesn’t mean only drivers with incidents on their driving records. Insurance companies may deny you traditional coverage for many reasons, including: [1]

Having no or a bad driving record: Inexperienced drivers, particularly teenagers , may find it difficult to get traditional car insurance coverage, as they’re at a higher risk of potential accidents. Plus, having speeding tickets , at-fault accidents, moving violations, DUI convictions, and more on your record can make you a high-risk driver for insurers.

Lapses in coverage and payment: If you’ve regularly let your insurance coverage lapse or forgotten to pay your premiums, this also makes you a higher risk to insure.

Bad credit scores: Depending on your state, insurance companies may be able to use your credit score to indicate your risk as a policyholder. Insurance companies believe drivers with poor credit are more likely to file a claim. [4]

Living in a risky location: Some areas have higher chances of theft, vandalism, or accidents. If you live in a high-risk area, you may have trouble securing traditional coverage.

Driving a unique or special car: Driving a custom, high-performance, unique, or classic vehicle could put you at higher risk for theft — and make you a higher risk for insurers.

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State-minimum policies start at $21 per month

Assigned risk vs. standard auto insurance

While assigned risk insurance plans ensure drivers can secure the minimum required coverage for their state, they’re not the same as standard car insurance policies. Here’s how these policies differ.

How to leave the assigned risk pool

Leaving the high-risk pool depends on why you’re a high-risk driver in the first place. If you have a traffic violation or accident on your record , you may need to wait until the incident falls off your record to qualify for a traditional car insurance policy.

You can work on leaving the assigned risk pool by:

Cleaning up your driving record: In some states, you can take defensive driving courses to dismiss violations or citations. This could help you more easily secure insurance coverage.

Improving your credit score: A better credit score may make it easier to get coverage, too. Paying your bills and debts on time, disputing errors on your credit report, and reducing your debts can help boost your score.

Driving a safer car: If you’re buying a car, consider one with high safety ratings, low theft rates, and anti-theft features. The less likely you are to file a claim, the lower your risk to insurers.

You can also simply wait it out. As you establish a record of driving safely and pay your insurance premiums on time, you become a lower risk to insurers. Some state plans require insurers to provide coverage for an extended period while you work to improve your insurance and driving records. In New York, insurers must cover you for at least three years before they can choose not to renew your policy.

Car Insurance for High-Risk Drivers in New York (2024)

Assigned risk auto insurance faqs.

Assigned risk auto insurance can be confusing, but it’s necessary for high-risk drivers who can’t buy coverage elsewhere. If you need more information regarding assigned risk insurance, see the answers to frequently asked questions below.

What is an assigned risk car insurance plan?

An assigned risk car insurance plan is a state-supervised insurance plan. Statewide insurers must participate in the plan and provide coverage to any eligible driver the state assigns to them. These plans typically come with much higher rates than traditional car insurance policies

What does “high risk” mean in auto insurance?

“High risk” means a driver is more likely to file a claim. High-risk drivers are usually drivers with poor driving records, low credit scores, little driving experience, or a history of not paying previous car insurance premiums.

Who writes assigned risk car insurance policies?

Private insurance companies write assigned risk car insurance policies. The state requires companies to participate in the assigned risk market and assigns these insurers to eligible drivers.

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Aly J. Yale is a freelance writer and reporter covering real estate, mortgages, and personal finance. Her work has been published in Forbes, Business Insider, Money, CBS News, US News & World Report, and The Miami Herald. She has a bachelor’s degree in radio-TV-film and news-editorial journalism from the Bob Schieffer College of Communication at TCU and is a member of the National Association of Real Estate Editors.

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Home > Finance > Assigned Risk Definition

Assigned Risk Definition

Published: October 9, 2023

Learn the meaning of "Assigned Risk" in finance and how it affects individuals and businesses. Explore its implications and potential strategies to manage it.

• Definition starting with A

(Many of the links in this article redirect to a specific reviewed product. Your purchase of these products through affiliate links helps to generate commission for LiveWell, at no extra cost. Learn more )

Understanding Assigned Risk Definition: What You Need to Know

When it comes to managing finances, there are numerous terms and concepts that can leave you feeling overwhelmed. One such concept is the assigned risk definition. But fear not! In this blog post, we’ll break it down for you, explain its significance, and provide you with key takeaways to help demystify this financial jargon.

What is Assigned Risk?

Before diving into the assigned risk definition, let’s briefly touch on why it exists. In the world of insurance, companies often face challenges when determining premiums for individuals with a high-risk profile, such as those with a history of accidents or driving violations. Insurers may be hesitant to provide coverage to these individuals, as they perceive them to be more likely to file claims, potentially leading to financial loss for the company.

This is where assigned risk comes into play. Assigned risk, also known as the residual market, is a system designed to ensure that high-risk individuals can still obtain insurance coverage. It is a state-mandated program that requires insurance companies to accept a certain number of high-risk applicants that they would otherwise decline.

Key Takeaways:

• Assigned risk is a system that ensures individuals with a high-risk profile can still obtain insurance coverage.
• It is a state-mandated program that requires insurance companies to accept high-risk applicants.

How Does Assigned Risk Work?

Now that we have a basic understanding of assigned risk, let’s explore how it works in practice. When an individual is considered high-risk and cannot secure coverage through traditional insurance channels, they can apply for coverage through the assigned risk pool. The pool consists of insurance companies that have agreed to participate in the program.

Upon applying, the applicant is assigned to a participating company within the assigned risk pool. The company is then obligated to provide insurance coverage, typically at a higher premium rate, based on the applicant’s risk profile. This ensures that even high-risk individuals have access to the essential coverage they need.

The Significance of Assigned Risk

The assigned risk system plays a crucial role in promoting fairness and equal access to insurance for individuals who face challenges in securing coverage due to their high-risk profile. It prevents insurance companies from denying coverage solely based on risk, ensuring that no one is left without the protection they may desperately need.

Furthermore, by spreading the risk across multiple insurance companies, the assigned risk system helps stabilize the insurance market and protects companies from potential financial losses.

In Conclusion

Assigned risk is a state-mandated program that ensures high-risk individuals can obtain insurance coverage. By assigning these individuals to participating insurance companies within the assigned risk pool, they have access to the essential protection they need, even if it comes at a higher premium rate. This system promotes fairness, equal access to insurance, and helps stabilize the market for both insurers and insured individuals.

So the next time you come across the term assigned risk, you can confidently navigate the topic and understand its significance in the world of finance and insurance.

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