JUA and RF
I am a little bit confused with how JUA and RF operate due to differences in examiner reports.
Under RF, are profit/loss shared by RF's determined formula or by insurers' market shares? I remember that in one year, the point was subtracted for answers mentioning the market share.
Under JUA, do insureds need to be denied by the voluntary market first? If I understand correctly, they just need to apply to an insurer, and this insurer will either retain or forward the application to a JUA servicing center.
Comments
If you're referring to 2016.Spring Q8, the answer in the examiner's report is wrong/outdated. (See footnote below BattleTable in the Cook wiki article.) The correct answer is that RF profit/loss is allocated by market share.
Under JUA, insureds do not need to be denied by the voluntary market. (That only applies to RF.) Under JUA, the insureds think they have been accepted by the voluntary market. The insured doesn't know their policy has been forwarded to the JUA.
What is the difference between JUA and RF? If I understand you correctly, with JUA the insured applies to insurer, which then forwards it to JUA carrier, which then writes the policy and services the claims with a fee, but the insured thinks they are being serviced by the insurer they applied with? Is that right? -- never mind, i kept reading and this was answered
If you have reached the level where you can answer you own questions, then my work is done! Nice job!
In your above comment graham you mentioned "Under JUA, insureds do not need to be denied by the voluntary market. (That only applies to RF.)" However reading the examiner reports (i.e., F2018 Q7a) it says "JUAs – Voluntary market rejects high-risk drivers. Agents/brokers forward application to the JUA or to a designated servicing insurer."
Am I missing something? Based on multiple examiner report answers, correct me if I'm wrong, but I would think that a driver would need to be rejected by the voluntary market first similar to ARP but different than RF where the driver doesn't know they have been denied by the voluntary market? (I.e., exact opposite of your comment above)
Follow-up to that question would be: how does the driver not know they go to the JUA if they have to first be denied by the voluntary market?
Unrelated question but related to the Cook material: You mention under JUA and RF in the wiki that "all insurers in state must share" ... could you clarify that statement? Share .. what exactly?
I wasn't as clear as I could be with my comment above:
When I said above that under a JUA, insureds do not need to be rejected by the voluntary market, I meant that insureds are not aware that they have been rejected. When a driver applies to an insurer, the insurer decides whether to keep the risk, or send it to the JUA (meaning they rejected it.) So yes, the insurer is rejecting the risk but the insured doesn't know this.
About your other question, what I meant is this:
(I have clarified this in the wiki.)
Okay thanks, but still a bit confused by how the driver doesn't know they have been rejected in the voluntary market. If lets say the driver approaches insurer A for insurance but driver A decides to send the driver to the JUA (i.e., JUA B ), wouldn't the drivers policy forms list the insurer as JUA B rather than insurer A, thereby indicating to the driver that they were rejected?
That is a good point and I went back and researched this. Basically, this is not discussed in the source text but there are 2 old exam problems where the sample answer states that insureds may not be aware of placement in a JUA. I have added a short wiki page discussing this here:
I also added a link from the relevant section in main wiki page on the Cook reading. The link to that section is:
(The link is in parentheses in the 2nd bullet point under "JUA Details".)
In the examiner's report for F2018 Q7a, the response for RF reads as follows:
"Insurers accept all auto insurance applicants, and if an applicant is considered a high-risk driver, the insurer has the option of assigning the driver's premiums and losses to the reinsurance facility."
So is it incorrect to say that under RF, insureds need to be denied by the voluntary market? That is contradictory to your comment saying "Under JUA, insureds do not need to be denied by the voluntary market. (That only applies to RF.) " However the examiner's report sounds like the insured does not deny any policies.
I think Graham's earlier comment in this thread had a little slip up; he must have meant to say "(That only applies to Assigned Risk Plans)", not RF.
Now, various notes in the wiki say that JUA policies are serviced by the JUA servicing carrier. (This is the servicing carrier of the JUA, i.e. it embodies the JUA.) At the same time, it is underscored that the insured is not aware that he's been transferred: this is the case for JUA and for RF. I can't quite see how the insured would still think he's serviced by the insurer, while he's serviced by the JUA servicing carrier. But I understand there is some vagueness in the text descriptions on this issue, so I'd say it's sufficient to take these statements at their face-value.
JUA details:
all insurers in state must share profits/losses/expenses even if they haven't been assigned any risks
If I'm understanding JUA correctly - the insurance companies don't really get assigned any particular policies they just have a share in the pool of policies.
I feel like the last part of the bullet point above "even if they haven't been assigned any risks" is not needed since they are assigned risk. The risk is just not a particular risk, its a share of the total pool.
The same bullet point for RF does make sense to me since the insurance company still needs to service claims, one question on the claims servicing - how is it determined which insurance company services which claims (do they service the ones they forwarded or are they assigned policies to service claims for based on their voluntary market share?)
They service the policies/claims that they forwarded to the RF.
I think there was a slight slip of tongue in the phrase "even if they haven't been assigned any risks." What was meant was "even if they did not assign any risks (to the JUA/RF)." That makes more sense.
that makes sense for RF, but I don't think that answered my question about JUA.
For JUA there is no servicing of policies as the policies are sent to a servicing carrier.
where RF does service the policies.
If I'm understanding it correctly I think that bullet point "all insurers in state must share profits/losses/expenses even if they haven't been assigned any risks" should be slightly different for JUA and RF
JUA: insurance company's doesn't get assigned anything to service, but all insurers that are active in the voluntary market share in the pool
RF: insurance company's services the policies they forward to the RF and all insurers that are active in the voluntary market share in the pool
In the alternative that I offered, I meant that the words "assign" and "transfer" can be used interchangeably. So, I'm using "assign" to mean the transfer of a policy from the insurer to either of the pools. The pools do not "assign" policies to insurers. They just take in the policies they were assigned, and later share the profits and losses on these policies among the market participant insurers.
thank you, that makes sense
Sure, good luck.
Staff - AC, when you say "the pools do not assign policies to insurers," directly contradicts the Spring 2015 #8c accepted answer of 'both assign high-risk insureds to specific insurers" when discussing similarities between ARPs & JUAs.
An additional question if the examiner's report is correct: if JUAs have a servicing carrier, and all insurer's share in the profits/losses/expenses, then what is the point of assigning a risk to a specific insurer?
in that instance I believe the risk is assigned to the one servicing carrier.
in many instances the JUA uses one of the insureds in the voluntary market as the servicing carrier. But the JUA can also use a number of insureds as servicing carriers.
The sample answer item you quote is wrong. We'll put a footnote in the wiki about it. Thanks for pointing it out.
There are some conditions that insureds are ineligible for ARP. Is there any ineligible condition for RF and JUA?
This is not explicitly mentioned in the source text as it is for the ARP. In general, it can vary by state but you can assume that these items would make a driver ineligible for the RF or JUA: