Comparisons
Trying to compare Assigned Risk Plans/Auto Insurance Plans, Joint Underwriting Associations, Reinsurance Facilities, and FAIR plans. Does the following all look correct?
Line of business:
- Auto: ARP/AIP, JUA, RF
- Homeowners: FAIR Plan
Must be explicitly rejected by voluntary market and then apply to residual market?
- Yes: ARP/AIP, FAIR Plan
- No: JUA, RF
Serviced by:
- Assigned Insurer: ARP/AIP
- Assigned Servicing Carrier (selected from specific subset of insurers in state): JUA
- Insurer applied to: RF, FAIR Plan (unlike the others, not also a voluntary market insurer)
Premiums/Losses shared among insurers in state by market share?
- Yes: JUA, RF, FAIR Plan
- No: ARP/AIP (but policies are shared by market share, so the effect is similar, if more volatile)
Rates determined by:
- Regulator: ARP/AIP
- JUA (uniform based on pool experience): JUA
- Insurer: RF
- FAIR Plan: FAIR Plan
Rates same for equivalent insureds?
- Yes: ARP/AIP, FAIR Plan, JUA
- No: RF
Comments
Line of business:
Must be explicitly rejected by voluntary market and then apply to residual market?
For JUA and RF, it's not quite so clear. Here, the insurer would reject the policy but the insured would not know this. This question came up in a previous forum question. See link below: (You may have to scroll down.)
==> https://battleacts6us.ca/vanillaforum6us/discussion/27/jua-and-rf
I also added a wiki page to address this question.
==> https://battleacts6us.ca/wiki6us/JUA:_Does_Insured_Know
Serviced by:
Premiums/Losses shared among insurers in state by market share?
Rates determined by:
Rates same for equivalent insureds?
Hi, could you clarify what's meant by "equivalent insureds"? I have questions about rates in the auto residual market, so this thread has been helpful.
Is the purpose of the residual market the ability obtain ****affordable**** coverage for high-risk insureds, or just ensure that there's available coverage?
"Equivalent insureds" are those that have the same risk characteristics. It's a way of saying "everything being equal."
AIP rates are set according to pool experience: they are not subsidized by the regulator. The insurer that the AIP policies are assigned to has the ability to subsidize these policies with rate increases on their voluntary book, but this would be an iffy strategy, and I have not ever seen this done.
Generally, residual market risks are priced according to their own pool experience. The goal is availability, not affordability. Their rates will inevitably be higher, and yes, there's the chance that they will go without insurance.