Where can you find auto insurance for high risk drivers?

Find cheaper high risk auto insurance online

A common misconception is that involuntary markets are forced on the insurance industry by the states. Insurers would prefer voluntary markets only, but states force them to insure high risk insureds at less than adequate rates. Insurers gain as well.

If there were no involuntary market, complaints about insurance unavailability might force states to constrain underwriting freedom or to replace the private market with a state run monopoly. Several states have monopolistic state funds, and many foreign countries used government run workers’ compensation programs. The pools allow a competitive market at a small cost to insurers. Find general auto insurance rates.

In an effort to keep auto insurance affordable, New Jersey regulators followed a policy of keeping rates in the assigned risk plan at or near rates in the voluntary market (and in some cases, lower than rates in the voluntary market), rather than basing rates on the loss experience of those insured through the plan. As a result of these artificially low rates that bore no cost relationship to losses incurred, auto insurers in New Jersey incurred higher losses on their assigned risk business in New Jersey than in any other state at that time.

From 1977-1981 the Automobile Insurance Plans Service Office estimated the New Jersey operating loss per insured vehicle at $201,53. Meanwhile, the price of insurance for some high risk drivers was actually lower in the state’s assigned risk plan than in the voluntary market.

To correct this situation, a new involuntary market mechanism was established in 1984. Under the new legislation, insurers no longer were to be assessed for losses in the involuntary market. Instead, these losses were to be funded by insurance surcharges for all vehicle violations and convictions and from state surcharges on all insurance policies, which in 1988 alone ranged from $110 to $173 on each car insured in the voluntary market. High as these assessments are, most observers feel that they will be insufficient for the foreseeable future to make up for the accumulated deficit, now in excess of $2 billion, in the involuntary market. Find general auto insurance rates!

Meanwhile, state regulators continue to deny voluntary market insurers permission to charge rates commensurate with losses and also continue to keep rates in the involuntary market artificially low. The problem, then, is not fundamentally with the involuntary market mechanism, but comes from the combination of two factors: New Jersey had the nation’s most expensive auto liability insurance system (insurers were required by law to provide unlimited no-fault benefits for medical care arid to fund lawsuits), and regulators refused to allow insurance companies to charge enough to fund the very high losses under this system.

Large involuntary markets and problems for insurers and their customers with the subsidy situation are not confined to New Jersey. Massachusetts also has a huge involuntary market. Insurers’ dissatisfaction with the subsidy situation led Fireman’s Fund, Allstate and several other companies to withdraw from writing any insurance in the state. In 1987, the reinsurance pool’s deficit was $672 million, bringing the total system deficit, since its inception in 1974, to more than $3 billion.

Problems in Massachusetts are compounded by provisions in the law that prevent companies from charging higher rates to high risk drivers, a situation which means that low risk drivers in Massachusetts must subsidize even more of the losses of high risk drivers than they do in states where such drivers pay higher premiums. Compare general auto insurance rates!

Comments are closed.