Assigned risk
Encyclopedia
Assigned risk means a driver of a motor vehicle
, or a class of such drivers, who would be denied insurance
coverage by insurance companies, but are required to be covered under U.S. state law. The term assigned risk is also used in Workers' compensation
law.
, usually the Department of Motor Vehicles
, assigns the risky motorists to automobile insurance companies.
The risky drivers are undesirable for some reason, and cannot purchase insurance through conventional means. They are considered high-risk because of numerous speeding or other traffic ticket
s, or a recent history of motor vehicle accidents, or in states that have a point system
, accumulation of so many points. The state DMV point system may be different from the insurance companies' point system.
Several states in the U.S. have such assigned risk systems. New York
is a typical system. The MVAIC, or Motor Vehicle Accident Indemnity Company, may assign high-risk drivers, and pays for victims of uninsured or underinsured
motorists. Uninsured means the driver or owner of a motor vehicle has no insurance at all, while an underinsured person has insurance, but the coverage is insignificant compared to the potential damages
accrued from a tort
lawsuit.
, whereby businesses who have had unsatisfactory loss performance or whose employees perform such hazardous functions that voluntary insurance companies will not insure them, can be assigned to an insurer.
A common problem with assigned risk is that some states' assigned risk plans only provide coverage for that state, causing businesses whose employees travel to other states to have various issues, including but not limited to the possibility of an uncovered claim from an employee claiming another state's benefits. If unable to secure a voluntary policy providing multiple state coverage, it is always possible to purchase a separate state's Worker's Compensation fund or NCCI assigned risk to fill the coverage gap, but this can be unfairly cost inefficient as some payroll is inevitably rated for in more than one policy - causing the premium to be much higher than if a voluntary coverage had been obtained.
This is especially an issue for Truckers or Contractors whose rates are already high and for whom it can be very difficult to obtain voluntary coverage due to the nature of their work.
Motor vehicle
A motor vehicle or road vehicle is a self-propelled wheeled vehicle that does not operate on rails, such as trains or trolleys. The vehicle propulsion is provided by an engine or motor, usually by an internal combustion engine, or an electric motor, or some combination of the two, such as hybrid...
, or a class of such drivers, who would be denied insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
coverage by insurance companies, but are required to be covered under U.S. state law. The term assigned risk is also used in Workers' compensation
Workers' compensation
Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence...
law.
Motor vehicle insurance
The state governmentState government
A state government is the government of a subnational entity in a federal form of government, which shares political power with the federal or national government. A state government may have some level of political autonomy, or be subject to the direct control of the federal government...
, usually the Department of Motor Vehicles
Department of Motor Vehicles
In the United States of America, a Department of Motor Vehicles is a state-level government agency that administers vehicle registration and driver licensing. Similar departments exist in Canada...
, assigns the risky motorists to automobile insurance companies.
The risky drivers are undesirable for some reason, and cannot purchase insurance through conventional means. They are considered high-risk because of numerous speeding or other traffic ticket
Traffic ticket
A traffic ticket is a notice issued by a law enforcement official to a motorist or other road user, accusing violation of traffic laws. Traffic tickets generally come in two forms, citing a moving violation, such as exceeding the speed limit, or a non-moving violation, such as a parking violation,...
s, or a recent history of motor vehicle accidents, or in states that have a point system
Point system
A demerit point system is one in which a driver's licensing authority, police force, or other organization issues cumulative demerits, or points to drivers on conviction for road traffic offenses. Points may either be added or subtracted, depending on the particular system in use. A major offense...
, accumulation of so many points. The state DMV point system may be different from the insurance companies' point system.
Several states in the U.S. have such assigned risk systems. New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
is a typical system. The MVAIC, or Motor Vehicle Accident Indemnity Company, may assign high-risk drivers, and pays for victims of uninsured or underinsured
Underinsured
Underinsured refers to various degrees of being insured for some real risks and uninsured for others, at the same time.-Health care:Johns Hopkins University professor Vicente Navarro stated in 2003, "the problem does not end here, with the uninsured...
motorists. Uninsured means the driver or owner of a motor vehicle has no insurance at all, while an underinsured person has insurance, but the coverage is insignificant compared to the potential damages
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
accrued from a tort
Tort
A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
lawsuit.
Workers' Compensation
Assigned Risk systems are also used for Workers' CompensationWorkers' compensation
Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence...
, whereby businesses who have had unsatisfactory loss performance or whose employees perform such hazardous functions that voluntary insurance companies will not insure them, can be assigned to an insurer.
A common problem with assigned risk is that some states' assigned risk plans only provide coverage for that state, causing businesses whose employees travel to other states to have various issues, including but not limited to the possibility of an uncovered claim from an employee claiming another state's benefits. If unable to secure a voluntary policy providing multiple state coverage, it is always possible to purchase a separate state's Worker's Compensation fund or NCCI assigned risk to fill the coverage gap, but this can be unfairly cost inefficient as some payroll is inevitably rated for in more than one policy - causing the premium to be much higher than if a voluntary coverage had been obtained.
This is especially an issue for Truckers or Contractors whose rates are already high and for whom it can be very difficult to obtain voluntary coverage due to the nature of their work.
See also
- InsuranceInsuranceIn law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
- Insurance companies
- Motor vehicleMotor vehicleA motor vehicle or road vehicle is a self-propelled wheeled vehicle that does not operate on rails, such as trains or trolleys. The vehicle propulsion is provided by an engine or motor, usually by an internal combustion engine, or an electric motor, or some combination of the two, such as hybrid...
- SuretySuretyA surety or guarantee, in finance, is a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults...
- UnderinsuredUnderinsuredUnderinsured refers to various degrees of being insured for some real risks and uninsured for others, at the same time.-Health care:Johns Hopkins University professor Vicente Navarro stated in 2003, "the problem does not end here, with the uninsured...
- Workers' compensationWorkers' compensationWorkers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence...