Residual Size Tied to Rating Laws:

An analysis conducted by the Property Casualty Insurers Association of America (PCI) suggests there is a connection between residual auto market populations and state rating laws. The analysis found that residual market populations, also referred to as assigned risk plans, are lower and that consumers have more choices in states with more competitive rating laws. The majority of states have assigned risk plans and a handful have alternative plans known as Joint Underwriting Associations (JUA) or reinsurance facilities; one even has a state-run fund. Eight states were reviewed along with their latest five-year average personal auto residual market share as a percent of the total number of insured cars in those states. The states are North Carolina (22.30 percent); South Carolina (13.87 percent); Massachusetts (8.88 percent); New York (4.52 percent); Rhode Island (2.85 percent); Maryland (2.52 percent); Hawaii (2.18 percent) and New Jersey (2.17 percent). “There are number of common characteristics shared by the states in this analysis, including similar regulatory rating laws. In states where file-and-use or other competitive rating is in place for auto insurance, residual market populations are lower and in states where restrictive laws are in place, residual markets decline when they change to competitive rating laws,” said Diana Lee, PCI assistant vice president, research.