2.

Personal Auto Insurance

Compensation of automobile Accident Victims No-Fault Automobile Insurance Automobile Insurance for High Risk Drivers Automobile Insurance Rate Regulation

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Automobile Insurance Compensation

Compensation of Auto Accidents

o The Tort Liability o Financial Responsibility Laws o Compulsory Insurance Laws o Uninsured Motorists Coverage o Underinsured Motorists Coverage o No-Fault Laws

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Automobile Insurance Compensation Tort Liability

Tort Liability System is the traditional and most commonly used method of seeking compensation for injured auto accident victims in the USA.

The injured auto accident victims must prove that another party was at fault before they can collect damages from that party.

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Advantges and Disadvantages of Tort Liability

Advantages
o o o

Remedy/Compensation for Victims of negligent or irresponsible drivers Victims are compensated thier Costs and are allocated to the resposible Party An incentive for drivers to act resposibly

Disadvantages
o o o

Time Delays in Settlement Significant legal and administrative Costs Amount of Punitive Damages

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Automobile Insurance Compensation Financial Resposibility Laws

Requires Motorosts to provide proof under Certain Circumstances, the ability to pay, up to a certain minimum amounts, for damage or injury that might cause as a result of Operating vehicle Various Circumstances
o After the occurence of auto accident involving bodily Injury or o property damage exceeding certain dollar amount o After Conviction for certain serious offenses o Upon failure to pay a judgement that results from auto accident

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Disadvantages of Financial Resposibility Laws

FRLs are effective only after an accident, a conviction or Judgement Dont guarantee payment to all accident victims because of
o Uinsured , hit-and-run, drivers of stolen Car

Delay in Compensation Injured persons might not be fully indemnified for their injuries

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Compulsory Insurance Laws

Law that requires the owners or operators of automobiles to carry automobile liability insurance atleast equal to certain minimum limits before the vehicle can be licensed or registered.

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Problems in Compulsory Insurance Laws

Non-guarantee of Compensation to all victims Insufficient Protection Delay in Compensation Doesnt reduce the number of UI Motorists Restriction on Insurers freedom to chose good insureds Unfailrly high Rates for good drivers Doesnt help in reducing the number of accidents

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Unsatisfied Judgment Funds

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Unsatisfied Judgment Funds

Compensation from fund after judgment and with the Proof that the judgment cant be collected Compensation amount is limited to States minimum Compulsory Requirement Negligent driver is not relieved of the legal liability even after Victim is compensated from Unsatisfied Judgment Fund ( License is revoked until negligent driver reimburses the fund)

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Uninsured Motorists Coverage(UM)

Protection against uninsured drivers
Insufficient Compensation Establishing the legal responsibility on the negligent Party Property damage exclusion Increased cost of insurance on the good drivers

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Underinsured Motorists Coverage(UIM)

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 Underinsured Motorists Coverage(UIM)

Limits of the negligent driver are less than the injured persons Coverage Increase Level of protection UIM may not be insufficient to cover all the expenses Increased cost of Insurance-Victim is paying for the negligence of others

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Uninsured Motorists Coverage(UM) Injury Caused by

Uninsured driver Hit and Run Driver A driver whose insurer is insolvent Disadvantages Incomplete Compensation Establishing legal responsibility on the negligent driver Property Damage exclusion Burden on the Insured for the actions of negligent driver

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No-Fault Auto Insurance

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No-Fault Automobile Insurance

No-Fault Auto Insurance

o No Burden of proof of negligence
o Benefits can be paid quickly o PIP

No-Fault Benefits
o Medical Expenses o Rehabilitation expenses o Loss of Earnings o Expenses for essential Services o Funeral expenses o Survivors Loss Benefits

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No-Fault Insurance Types

Types of No-Fault Laws

o Modified No-Fault Laws

Monetary threshold
Verbal threshold o Add-on Plans o Choice No-Fault Laws Selection of No-Fault Coverage Non-Selection of No-Fault Coverage

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No-Fault Laws

Arguments in Favor
o No need to determine the person at fault o Eliminate inequalities in Claim payments o Correcting the limited scope in current Tort System o Decreasing the cost of Claim investigation

o Avoiding delays in Claims

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No-Fault Laws

Arguments aginst
o Defects of Tort Liabilty exaggerated
o Claims of premium Savings are exaggerated o Penalization of Safe Drivers o Payments doesnt include for pain and Suffering

o Needs reforms in Tort System and not replacement

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Auto Insurance in Residual Market

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Standard Market

Residual or Shared Market

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Automobile Insurance for High Risk Drivers

Automobile Insurance Plans

o Once werecalled Assigned Risk Plans

Joint Underwriting Associations(JUAs) Reinsurance Facilities

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Automobile Insurance Plan Characteristics

Proof of securing the insurance in standard market ( Timelimit 60 Days)

Minimum Limits -> States financial Responsibility laws mandates

Coverage Restriction to some people
o Covicted of felony in last 36 months o Engaged in illegal activities

o Habitual Violators

High Premiums

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Rating of personal Auto Insurance

Rate Regulation, Including underwriting

Matching Price to Exposure Competiion among Insurers

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Motor Insurance Underwriting

Primary Rating Factors

Secondary Rating Factors

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Motor Insurance Rating- Primary Rating Factors

Primary Rating Factors to Underwrite a Auto Policy are

o Age o Gender

Female drivers are considered as safe drivers as compared to Male Drivers

Young male drivers drive more than young female drivers o Marital Status
Marriage tends to raise maturity

Young married couples spend more time at home rather than their unmarried people o Territory o Use of the Auto

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Motor Insurance Underwriting Factor- Age

Accident rate is more in age group 25-34

More young drivers are involved motor vehicle crashes than that of
older drivers Death Percentage is more for teenagers in timings 9 PM- 3 AM Young driver accidents are due to their inexperience and immaturity

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Motor Insurance Rating Secondary Rating Factors

Secondary Rating Factors that influences the Underwriting are

o Driving Record o Type of Vehicle o Number of Vehicles o Deductibles o Liability Limits o Discounts o Good Student Discount o Driver education Credit

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Motor Insurance Rating -Discounts

Other Discounts and Credits

Anti-Theft Devices

Passive Restraints
Defensive Driving Courses Senior Citizens Farmers Nonsmokers

Number of Years of Continuous coverage with Insurer(Renewal or Anniversary Discount)

Multi-policy or Account Discount Reduced vehicle use by Students

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Motor Insurance Underwriting

Matching Price to Exposure

- Preferred - Standard - Non Standard ( Sub Standard)

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Motor Insurance Underwriting

Competition among Insurers

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