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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 CompensationTort 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 Remedy/Compensation for Victims of negligent or irresponsible drivers

o Victims are compensated thier Costs and are allocated to the resposible Party

o An incentive for drivers to act resposibly

Disadvantageso Time Delays in Settlement

o Significant legal and administrative Costs

o Amount of Punitive Damages

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Automobile Insurance CompensationFinancial 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 ofFinancial 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 ofautomobiles to carry automobile liability

insurance atleast equal to certain minimum limitsbefore the vehicle can be licensed or registered.

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Problems in Compulsory Insurance LawsNon-guarantee of Compensation to all victimsInsufficient ProtectionDelay in CompensationDoesnt reduce the number of UI MotoristsRestriction on Insurers freedom to chose good insuredsUnfailrly high Rates for good driversDoesnt 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 thejudgment cant be collected

Compensation amount is limited to States minimum CompulsoryRequirement

Negligent driver is not relieved of the legal liability even after Victim iscompensated from Unsatisfied Judgment Fund ( License is revoked untilnegligent driver reimburses the fund)

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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 expensesIncreased cost of Insurance-Victim is paying for the negligence of others

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Uninsured Motorists Coverage(UM)

Injury Caused byUninsured driverHit and Run DriverA driver whose insurer is insolvent

DisadvantagesIncomplete Compensation

Establishing legal responsibility on the negligent driverProperty Damage exclusionBurden on the Insured for the actions of negligent driver

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No-Fault Auto Insurance

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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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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 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 Deductibleso Liability Limits

o Discounts

o Good Student Discount

o Driver education Credit

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Motor Insurance Rating -Discounts

Other Discounts and CreditsAnti-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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