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WHAT ARE STATE AUTO INSURANCE PROGRAMS?

These programs are designed to provide some coverage to hard-to-insure drivers and commonly referred to as assigned risk plans (this term is not used due to its negative connotations.) Premiums of state run programs significantly vary among the states, yet the premiums tend to be higher than normal premiums.
State programs follow one of the three models indicated below:

• Reinsurance facilities: Under this model, insurance companies must accept all applicants who have a valid driver's license. However if the applicant is high-risk, insurance company has a right to assign the premiums for the applicant to the reinsurance facility. All insurance companies share the losses in proportion to the auto insurance premiums written.
• Automobile insurance plans: This is the most common model used in most states. Applicant must prove that he is not able to obtain insurance coverage within a recent specified period of time. Each auto insurance company in the state is assigned its proportionate share of the drivers in the plan based on the total volume auto policies written in the state.
• Joint underwriting associations: This model involves an association of auto insurers where all business is placed in a pool. Insurance companies share any losses in proportion to the auto insurance premiums each company writes in the state. A limited number of insurance companies are designated to issue and service the policies.