In contrast, insurers participating in an
assigned risk plan pay claims with their own financial resources and consequently have no more incentive to be generous in the adjudication of claims than they are with their private market insureds.
"Year 2001 saw our first increase in the
assigned risk plan rates while experiencing a decrease in the voluntary market," Dan Honey, deputy commissioner of the Arkansas Insurance Department, said.
14 An
assigned risk plan is an involuntary market mechanism in which people can apply to the plan for coverage and have coverage assigned to an insurer in the state at a regulated rate.
In 2002, the department worked with the
assigned risk plan Governing Committee to expand the Territorial Take-Out Program so that insurers would have more incentive to write assigned risk drivers in the voluntary market.
When claims exceed premiums for a given year, the state does not have to shoulder the losses from the
assigned risk plan.
* The
assigned risk plan covered 61,016 motorists in 2006, a drop of 82,500 motorists in three years, indicating a healthy voluntary market.
For many years, the
assigned risk plan in New York was the territory of the likes of Abe Eisenstein, Stewart Fries, and other exponents of this group.
Greenwald also noted the
assigned risk plan has been reduced from 140,000 motorists in 2003 to 61,000 now; auto insurance is no longer a primary concern of New Jersey residents, and companies had reduced their rates in total by $500 million because of competition.
The companies must write at least 95 percent of their zone share by September to escape the sanction of getting assigned exposures in the
assigned risk plan.
Noncompliance may lead to fines, a camp's inability to secure workers compensation insurance outside of
assigned risk plans, which have higher rates and surcharges, and payment of damages for injuries to employees that come out of company assets or current camp income.
It is not a market of last resort such as the auto or workers' compensation
assigned risk plans. E&S carriers provide a much needed outlet for insurance buyers who present a more challenging type of risk to the insurance market.
"Other states that have gone to less regulated markets have seen their
assigned risk plans shrink."
