An insurer servicing private market or
assigned risk plan policies and bearing the full financial cost of indemnity benefits minimizes costs by operating at Point [M.sub.1] on cost curve A.
When employers can't find an insurer willing to sell them a policy, they join the
assigned risk plan.
Large involuntary markets will result, which in turn will discourage the use of
assigned risk plans, as opposed to alternative mechanisms such as reinsurance facilities or joint underwriting associations.(14) Empirical evidence supports this conjecture: States with the largest involuntary markets (Massachusetts, New Jersey, New Hampshire, North Carolina, and South Carolina) generally have significant limits on rate classification.(15) They also have used reinsurance facilities or joint underwriting associations--as opposed to
assigned risk plans.(16)
Take-out auto insurers responded aggressively to the expansion of the take-out program by insuring more New Yorkers at rates below those charged by the
assigned risk plan. As a result, the percentage of New York drivers in the
assigned risk plan began to decline once again in 2004 to what the department believes will be a historically low level.
The state Insurance Department is trying to do something to correct the imbalance caused by the
assigned risk plan. Effective Feb.
"The existence of this exemption allows companies to exchange critical data regarding losses and other factors, facilitates the development and operation of
assigned risk plans, facilitates participation and oversight of state guarantee funds, permits state control over liquidations of insurers, and promotes competition in the marketplace," Gackenbach says.
Describing the progrom, Runge said it "prrovide a voluntary placement facility for all motor vehicle owners and operators, completely replacing the Provincial
assigned risk plans which were similar to our state
assigned risk plans.
Burnes, however, has said she has seen no evidence to support claims that the
assigned risk plans would grow that large.
In his next paragraph, the writer quickly glosses over Vermont's approach to such items as "recognition of insurance and exemption from guarantee funds, joint underwriting associations and
assigned risk plans." We are all aware of this current situation and of the fickle nature of onshore regulators.
In this study, [lambda.sub.I] is the inverse of the target loss ratio for the involuntary market that would produce zero underwriting profits according to the Automobile Insurance Plans Service Office (AIPSO Facts, 1983), the official industry ratemaking organization for the involuntary market in states with
assigned risk plans. These targets assume that all investment income is needed to cover income tax costs, the cost of capital, and any other costs not included in underwriting expenses.
In states with workers' comp
assigned risk plans, insurance company management must evaluate the relative merits of being a direct assignment carrier vs.
In a state represented by one association, issues like no-fault and
assigned risk plans are discussed with all members and the association's position is based on the decision of the board made up solely of voting members who represent the overall membership.
