North Carolina High Risk Car Insurance

The Reinsurance Facility

 

After points, the second major factor affecting the cost of liability insurance is whether a motor vehicle owner has been transferred (through a process known as “ceding”) to the North Carolina Motor Vehicle Reinsurance Facility. The Reinsurance Facility is a nonprofit legal entity consisting of all insurers engaged in writing motor vehicle insurance in North Carolina. Its purpose is to provide liability insurance for drivers or vehicle owners whom companies do not wish to insure as part of their regularly voluntary business. In brief, it is a method of transferring the risk of loss from the individual insurance company to all insurance companies.

 

North Carolina law makes no provision regarding which individuals are to be ceded to the Reinsurance Facility. The decision belongs entirely to each particular insurance company. If an applicant for motor vehicle liability insurance is, for any reason, considered an undesirable risk by the company, it may cede the applicant to the Reinsurance Facility even though the person has a clean driving record. In other words, it is possible for a person who has never received a traffic citation or had an accident to be ceded to the Reinsurance Facility.

 

Obviously, those with bad driving records are prime candidates, but a company may transfer anyone it considers a bad risk for any reason. Reportedly young drivers, the elderly, and some occupational groups often fall within this category. There is not appeal process, but applicants may seek coverage with another company that would not cede them to the Reinsurance Facility.

Because the Reinsurance Facility has many high-risk drivers, the SDIP provides that it may charge a higher base rate than is allowed in the voluntary market. Insured's ceded to the Reinsurance Facility who are clean risks—meaning, for this purpose, that no one on the policy has any points and no driver on the policy has less than two years’ driving experience—pay the same as other policy holders with clean driving records who have not been ceded. However, a driver in the Reinsurance Facility who had insurance points were more than 50 percent higher, and those drivers pay the surcharge for their points on top of that higher rate.

North Carolina Assigned high risk insurance means a driver of a motor vehicle, or a class of such drivers, who would be denied insurance coverage by insurance companies, but are required to be covered under U.S. state law. The state government, usually the Department of Motor Vehicles, or an appointed administrator, assigns the risky motorists to auto insurance companies servicing higher risk customers.

The risky drivers are undesirable for some reason, and can not purchase insurance through regular market companies. They are considered high-risk or assigned risk because of numerous speeding or other traffic tickets, or a recent history of motor vehicle accidents, or in states that have a point system, accumulation of so many points. The state DMV point system may be different from the insurance companies' point system.

The losses and profits incurred by an insurance company from assigned drivers are not shared with other companies. As a result, the assigned risk system may give companies greater incentive to minimize costs and claims paid than other residual market systems.
 

NC Assigned High Risk Insurance Plans Under an assigned risk plan, each insurance company initially is allowed to refuse to sell insurance to any driver, except for reasons prohibited by antidiscrimination laws. Drivers who are initially unable to buy insurance may appeal to an organization that assigns such drivers to insurance companies in proportion to company market share. Each company is required to sell insurance to its assigned drivers, for which the company receives premiums, pays claims, and provides service.