cook - personal insurance

Question 1

4 residual marketes for high risk drivers

Answer 1

assigned risk plans

joint underwriting associations

reinsurance facility

maryland state fund

Question 2

Auto residual market programs (3)

Identify

Answer 2

Assigned risk plan

Joint UW Association

Reinsurance facility

Maryland state fund - assigned risk plan in MA

Question 3

Assigned risk plan

how does it work

servicer

loss sharing

rates

Answer 3

1. driver rejected by voluntary market 1st
2. applicant shows they cant get coverage
3. driver assigned to insurer based on WP market share (bad: consumer doesn’t choose servicer)

profit/loss sharing: Insurer retains driver’s profit/loss & services them like private market (higher variability of losses than JUWA & RF)

Rates: insurers rate on the risk

Question 4

Joint UW Association

how it works

service

loss sharing

rates

Answer 4

1. driver rejected by voluntary market 1st
2. applicant shows they cant get coverage
3. broker submits them to JUA

Service: servicing carrier (bad: consumer doesn’t choose servicer)

All insurers in state share profit/loss (even if not in JUA) in proportion to WP market share (lower variability of losses than ARP)

Rates: JUA sets uniform rates across all insurers

Question 5

Reinsurance facility

how does it work

service

loss sharing

Answer 5

Driver applies to voluntary market & insurer choose to keep policy or fwd to RF (good: no stigma for consumer)

Service: same insurer (good: consumer choose servicer)

All insurers in RF share profit/loss in proportion to WP market share (lower variability of losses than ARP)

Question 6

Describe maryland state fund

Answer 6

insurers in state subsidize high risk drivers in the fund by surcharging their own insureds

Question 7

Fair Access to Insurance Requirements plan (FAIR plan)

3 examples

sharing losses

serviced by

when eligible

Answer 7

1. urban homes can’t find coverage due to riot risk
2. brush area homes cant find coverage due to fire risk
3. coastal homes can’t find coverage due to wind risk

loss sharing: All insurers in state in proportion to premium market share

​Serviced: by group of insurers for % of premium

Eligibility: can’t get voluntary market coverage, inspected

Question 8

Beachfront and windstorm plan (HO coverage for coastal homes)

purpose

serviced by

elgibility

inelgibility

Answer 8

Purpose: affordability & availability

Fills unmet need, social purpose, efficient

Compulsory for fed backed mortgages only

serviced by group of insurers

eligible: inelgible on voluntary market, coastal area

Ineligible: damaged or vacant homes