Back To: INSURANCE & RISK MANAGEMENT

What is Assigned Risk?

An assigned risk refers to a poor risk, that is, a risk that is difficult to insure but an insurance company is required to provide coverage for in accordance with the state law. For instance, if a person such as an accident-prone driver is denied coverage because of their previous records but are required to be covered under the states' assigned risk plan, this is an example of Assigned Risk. Usually, assigned risks do not have coverage in the general marketplace but are assigned to be covered by insurers according to the state law.

How Does Assigned Risk Work?

The common definition of an assigned risk is a risk that insurance companies would not cover under normal circumstances but are forced to provide coverage for as stated by the law. Generally, when providing coverage for a party, the risk profile is evaluated in order to determine the cost of the policy. Given that assigned risks have greater risks, they are more expensive than other policies. In certain cases, an assigned risk is covered by insurance companies who charge more money given the degree of the underlying risk. In other cases, insurance companies merge to provide coverage for assigned risks.

Risk Pool

Insurance regulators in different states realized that insurance companies are after clients or policyholders that will guarantee profit for the company. This is not the case with assigned risks because they entail greater risks and reduce the chances of profits. Given that insurance companies avoid providing coverage when an insured is deemed too risky, the state regulators require that companies must provide coverage for assigned risks. Assigned risks refer to a group of people who are not naturally catered for by insurance companies because of their high-risk tendencies, an accident-prone motorist or driver is a good example. State insurance regulators as part of ways to extend coverage to groups that would otherwise be rejected created the concept of assigned risk.

Related Topics

• Insurance Law (Intro)
• What is insurance?
• Captive Agent
• Independent Agent
• Captive Insurance Company
• Underwriter 
• Combined Ratio
• Claims Adjuster
• Capital at Risk
• Assigned Risk
• Contingency
• Incurred But Not Reported
• Actuary
• Qualified Actuary
• Cession (Re-Insurance)
• Burning Cost Ratio
• What is an insurance contract?
• Accidental Means
• Anti-stacking Provisions
• What is an insurable interest?
• What are the common categorizations of insurance?
• National Association of Insurance Commissioners
• Insurance Regulatory Information System
• American Academy of Actuaries Definition
• American Association of Insurance Services Definition
• American Council of Life Insurance Definition
• American Insurance Association Definition
• American Risk and Insurance Association Definition
• LLoyd's of London
• Associate in Insurance Services (AIS) Definition
• Associate in Loss Control Management Definition
• Associate in Marine Insurance Management Definition
• Associate in Personal Insurance Definition
• Associate in Reinsurance (ARe) Definition
• Associate in Risk Management Definition
• Associate in Commercial Underwriting Definition
• Associate in Insurance Accounting and Finance Definition
• Associate in Surplus Lines Insurance Definition
• Chartered Insurance Professional Definition
• Chartered Life Underwriter Definition
• Chartered Property Casualty Underwriter Definition
• Vehicle insurancePrivate Passenger Auto Insurance Risk Profile
• Underinsured Motorist Coverage
• Uninsured Motorist Coverage
• Omnibus Clause
• Health insurance
  
• Health Maintenance Organization
• Capitated Contract
• Point of Service Plan
• Children's Health Insurance Program
• Disability Insurance?
• Credit Disability Insurance
• Life Insurance?
• Cash Surrender Value
• Absolute Beneficiary
• Acceleration Life Insurance
• Accelerated Benefit
• Accelerated Option
• Accelerative Endowment
• Charitable Gift Life Insurance
• Incontestability Clause
• Waterfall Concept
• Annuitization
• Assumed Interest Rate
• Clean Sheeting
• Hazard Insurance 
• Homeowners, Renters, and Fire Insurance?
• Participating Community (Flood Insurance)
• Insurance Considerations for Business
• Business Liability Insurance
• Commercial General Liability
• Liability Risk Retention Act
• Excess Insurance and Umbrella Insurance Policy
• Business Interruption Insurance
• Key Person Insurance Definition
• Own-Occupation Policy
• Self-Funded Health Insurance Plan
• Basket Retention Policy
• Commercial Blanket Bond
• Alternative Risk Transfer Market Definition
• Commercial Property Casualty Market Index Survey
• What are the primary obligations of the insurer?
• Earned Premium
• Reservation of Rights Letter
• Subrogation
• Collateral Source Rule
• What are the primary obligations of the insured?
• Insurance Premium
• Cooperation Clause
  
• Coinsurance
• Co-Pay
• Affidavit of Loss
• What is the general structure of an insurance contract?
• Ambiguity Principle
• Accommodation Line
• What are the common disputed provisions in an insurance contract?
• Absolute Exclusion
• All Risks Clause
• What is required for the termination of an insurance contract?
• Risk Management
• Professional Risk Manager
• Associate in Management (AIM)
• Financial Risk Manager
• Forecasting (Business)
• Objective Probability
• Unconditional Probability
• Enterprise Risk Management (ERM)
• Operational Risk
• Business Recovery Risk
• Political Risk
• Asset Protection
• Performance Bond
• Barra Risk Factor Analysis Definition
• Above Ground Risk (Mining Industry)
• Bumbershoot Policy (Maritime)
• Abandonment Clause (Boat or Vessel)
• Bobtail Liability Insurance (Trucking Industry)
• Anti-Indemnity Statute (Construction)