Under an Assigned Risk Insurance Plan, each insurance company initially is allowed to refuse
to sell insurance to any driver, except for reasons prohibited by antidiscrimination
laws. Drivers who are initially unable to buy insurance may appeal to an organization
that assigns such drivers to insurance companies in proportion to company market
share. Each company is required to sell insurance to its assigned drivers, for which
the company receives premiums, pays claims, and provides service.
The losses and profits incurred by an insurance company from assigned drivers are
not shared with other companies. As a result, the assigned risk system may give
companies greater incentive to minimize costs and claims paid than other residual
market systems.
