Cook Flashcards

1
Q

Coverage restrictions an insurer might place on a high-risk driver before voluntarily providing coverage

A
  • Higher deductibles (comprehensive or collision)
  • Lower limits (liability)
  • Exclusion of certain coverages (medical, glass coverage)
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2
Q

3 mechanisms for operating a state residual auto insurance market

A
  • ARP (Assigned Risk Plan) also sometimes called AIP (Auto Insurance Plan)
  • JUA (Joint Underwriting Association)
  • RF (Reinsurance Facility)
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3
Q

Assigned Risk Plan (ARP)

A
  • Driver applies and is rejected by the voluntary market
  • Driver applies to ARP
  • Driver is assigned to an insurer based on insurer’s WP market share
  • Regulator sets uniform rates (same rates across all insurers)
  • Insurer fully services policy as if voluntarily written (collects premiums, pay claims)
  • Insurer retains profits/losses
  • Driver knows they’re in residual market – stigma attached to this
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4
Q

Items that may make a driver ineligible for ARP

A
  • No valid driver’s license
  • Felony conviction within the past 36 months
  • Habitual violation of the law
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5
Q

Joint Underwriting Association (JUA)

A
  • Driver applies to insurer in voluntary market
  • Insurer chooses: keep policy or insurer/agent/broker forwards to JUA servicing carrier (driver doesn’t know if they go to JUA)
  • JUA sets uniform rates
  • Servicing carrier services claims
  • Insurer shares in profits/losses/expenses in proportion to their voluntary business market share
  • All insurers in state must share profits/losses/expenses even if they haven’t been assigned any risks
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6
Q

Reinsurance Facility (RF)

A
  • Driver applies to insurer in voluntary market
  • Insurer chooses: keep policy or forward to RF (driver doesn’t know if they go to RF)
  • Intended to be non-profit enterprises to fulfill the social good of universal availability of auto insurance
  • Insurer services claims
  • Insurer shares in profit/losses/expenses in proportion to their voluntary business market share
  • All insurers in state must share profits/losses/expenses even if they haven’t been assigned any risks
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7
Q

FAIR Plans

A

Fair Access to Insurance Requirements
* Motivation: Certain risks are essentially uninsurable, but lenders often require coverage
* Covered risks:
Properties in areas susceptible to crime/riots (urban areas after riots of 1960s)
Individuals with high number of prior claims

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8
Q

How FAIR plan works

A

Rationale:
* Property owners in urban areas couldn’t find coverage due to crime/riot risk
* Could also cover coastal properties subject to windstorm damage

Operation:
* Policies are serviced by a syndicate or private company (who collect premiums, handle claims, & take a cut for their service)
* Premiums & losses are shared by all property insurers in state

Eligibility:
* Coverage must have been denied by the private market
* Property must not be vacant or trespassed onto, must not be damaged or poorly maintained, and must meet building codes

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