What Are “Automobile Insurance Plans”?

IMG_20130502_093842-1Automobile Insurance Plans are designed to help individuals and businesses obtain insurance coverage when they have difficulty securing policies for one reason or another.

To protect the general public, most states require financial security from car owners in order for them to register their vehicles.  Security is not required only when the insurance company of the owner of the vehicle furnishes a notice (SR-21) stating that an acceptable amount of automobile liability insurance was in effect at the time of the accident.  A car owner’s license will be suspended if he is unable to furnish security or proof of financial responsibility.  Such suspension continues until security or proof is filed or until one or more years after the accident, if no action is filed.

Automobile Insurance Plans

In those states that have Compulsory Liability Insurance laws, owners and operators of automobiles are required to provide protection for injuries or damages that they may cause while driving their vehicles on public streets.  State Financial Responsibility Laws make it virtually impossible for most people to own or operate an automobile without insurance.

Since insurance companies are free to decline an insurance applicant who does not meet their underwriting criteria, there will be situations when an individual or a business entity that wishes to secure automobile liability insurance may be unable to obtain it.  The groups that are deemed high risked, and therefore undesirable in the “voluntary market” are usually young drivers and drivers with multiple traffic infractions and accidents.  In order to make auto insurance available to this class of drivers, and to distribute these risks fairly among all the insurers licensed to write automobile insurance businesses, every state has enacted laws instituting Automobile Insurance Plans.  These statutes generally empower the state insurance commissioner to devise a method of assigning risks among insurers.  In most cases, Plan applications are distributed in proportion to the insurance companies’ amount of auto liability insurance premiums written in the voluntary market in the state.

The New York Automobile Insurance Plan was set up pursuant to Article 53 of the New York Insurance Law.  All insurers writing automobile insurance policies in New York State must participate in the NYAIP.  Insurance applications are submitted to the NYAIP through Plan-certified insurance brokers.  These Plan polices are then assigned to an insurance company.  After the application is assigned by the NYAIP, applicants are notified by the assigned insurance company or by the certified broker.

Any eligible driver who cannot secure an automobile liability policy in the voluntary market may apply to the state Automobile Insurance Plans.  The Plan will then assign the policy to an insurer writing auto policies in the state.  This is why Plan policies are also referred as “assigned risks”.

All applicants of the Plan must have made an effort to obtain coverage in the voluntary market and have been refused.

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