Assigned risk or high risk automobile residual insurance market consists of drivers unable to purchase automobile insurance from the voluntary market due to record of reckless driving, accident history or status as a first-time driver.
Assigned high risk insurance covers these drivers who would be refused insurance converge by insurance companies but are required to be covered under the US state law.
Under the assigned risk plan an insurance company may refuse to sell insurance to any driver at the first instance, except for reasons prohibited by anti discrimination laws. Drivers who are initially unable to buy insurance may apply to the concerned state government, usually the department of motor vehicles that assigns such drivers among different insurance companies in proportion to their market share. Each insurance company is obliged to sell insurance to such drivers assigned to it by the authority, regardless of their history of accidents.
Assigned risk systems are also in place for workers’ compensation. Business concerns whose employees perform high risk functions or hazardous jobs are not likely to be voluntarily covered by insurance companies, unless assigned to or thrust upon by the appropriate authority to an insurer. Such workers in hazardous employments are assigned to different insurers for coverage. Since risk assignment plans are state specific, employees traveling to other states face various issues including risk of falling uninsured or exposure to higher premiums for multiple states coverage.
