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Assigned risk is a term used to describe a person or company who cannot get insurance through normal means and is placed in an assigned risk pool of people whom insurers must cover. This term is seen most commonly in car insurance although it may also be used to refer to companies which cannot get workers' compensation insurance by other means. The purpose of this is to ensure that everyone can access insurance because this is deemed better for society as a whole than the alternative.
In the case of a driver, drivers often have trouble getting insurance if they have bad driving records. If a driver applies for insurance multiple times and is turned down, the driver can file an application to be placed in the assigned risk pool. This pool of drivers is serviced by every licensed insurance company as the government requires insurance companies to participate in the assigned risk pool.
The driver is assigned to a specific company and the insurer provides coverage. However, the cost of the insurance is usually much higher than that of insurance purchased on the open market. This is designed to compensate the insurance company for covering a poor risk. The insurer knows that it will likely have to pay out on the driver's policy. The insurance works just like regular insurance and in areas where drivers must be insured to drive an assigned risk pool ensures that everyone on the road has the ability to buy insurance, even if it might be expensive.
In workers' compensation, a similar situation can arise. A company with a poor record may apply for insurance and be repeatedly turned down by insurance companies which view the applicant as a poor risk. Because workers' compensation is required in most regions for the safety and benefit of workers, the company can be placed in an assigned risk pool to get mandatory coverage through an insurer. As with assigned risk pools for car drivers, the price of the insurance is much higher.
Similar pools have also been established for health insurance. Some regions have a high risk insurance pool which people can apply to enter if they have trouble getting health insurance. Typically the level of coverage offered is much lower and the premiums can be high, but people may view this as acceptable given that the alternative involves paying for all health care out of pocket. Since most people who end up in the high risk pool have expensive health problems, expensive insurance is preferable to personally covering all health costs.
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