For those holding valid Ohio drivers licenses, there are three avenues available for auto insurance:

• The voluntary standard market, where insurance is obtained at competitive rates through a selected insurance company without state assistance.
• The voluntary nonstandard market, where insurance is obtained through a selected insurance company, but with a higher premium, based on higher risk factors such as an imperfect driving record or insuring a specialty vehicle.
• The involuntary residual market, known in Ohio as the Ohio Automobile Insurance Plan (OAIP), is a state plan that guarantees liability coverage for those who have difficulty obtaining insurance through the voluntary standard and nonstandard markets.

Voluntary standard market

Close to 100% of Ohio’s millions of insured drivers are eligible for coverage through insurance companies, thus making it one of the most favorable markets in the country. According to a 2000 study by the National Association of Insurance Commissioners, Ohio’s 1998 auto insurance premiums were nearly $156 less than the national average, with auto premiums that are lower than all but nine states.

Due to the competitive nature of writing voluntary standard insurance within the state, it’s advisable to compare the rates and services of various companies and agencies prior to purchasing insurance. According to the Ohio Department of Insurance, there are 952 P/C insurance companies licensed in Ohio, the majority of which offer auto insurance. A.M. Best reports that 611 companies wrote auto insurance in Ohio in 1999, making the state ninth highest in direct premiums written for all auto lines of business.

Voluntary nonstandard market

Nonstandard markets were originally developed because of the need to fairly assess policyholders based on their driving records. Now they are also used to insure specialty vehicles such as high-powered sports cars or custom-built vehicles. Since insurance is basically a pooling device for policyholders who share in the losses of a few, all would pay more for insurance if separate risk categories weren’t established.

Roughly four out of every five drivers fall into the standard or preferred auto insurance market. Remaining drivers are finding it easier to secure coverage through insurance companies rather than reverting to state-run pools, because many insurers offer insurance products specifically geared toward the nonstandard market through separate subsidiaries and/or risk categories. There are also insurance companies that specialize in insurance products geared toward drivers who accrue multiple moving violations or traffic accidents.

In recent years, the lines between standard and nonstandard, and various levels of risk have begun to blur. This is partly due to the fact that the availability of data bases combined with high-speed computers enable insurers to better separate moderate risks from high risks. Insurance companies have also gained more latitude in establishing premiums based on the driving records of their policyholders. Some companies have a variety of higher risk placement resources available and based on an individual’s driving record and other personal factors, the policyholder might be considered a preferred or moderate risk rather than being assigned to a company’s nonstandard program as in the past.

According to a report by Conning Insurance Research & Publications (Hartford, CT), premiums written for high-risk drivers totaled $4.4 billion in 1992. A.M. Best data shows direct premiums written in the nonstandard auto insurance market quintupled to over $22 billion in 1997, just five years later. In comparison, the total auto insurance market was $88.4 billion in 1992, rising to $131.6 billion in 1997—about a 49% increase.

A.M. Best data for 1999 shows that direct premiums written for nonstandard auto insurers continues to grow. Combined, they contributed about $33.4 billion of the $118.9 billion in direct auto insurance premiums written in the US. This is over 28% of the auto insurance market, based on premium volume.

Most nonstandard auto insurers use independent agents as their distribution method, although some are using other distribution methods including direct marketing, the internet and toll-free numbers. The top writers of nonstandard auto insurance include: Allstate, Progressive, Berkshire Hathaway, Farmers and Great American.

Involuntary residual market

Each state and the District of Columbia manage their own involuntary high risk insurance plans. According to the Automobile Insurance Plans Service Office (AIPSO), about 3.4 million of the over 157 million insured private passenger cars in the US were insured through the involuntary market in 1998 or about 2.1%. This is down from 2.5% of all insured private passenger vehicles insured through state plans in 1997.

The number of cars insured through these plans can be viewed as a “meter” in determining the availability of voluntary insurance within a state. The smaller the number of assignments in a state’s plan, the greater the number insured through the voluntary insurance market. In states where rates are held down artificially through legislation, many more drivers are insured through the involuntary market.

Ohio Auto Insurance Plan 1999 statistics show that only eight passenger vehicles (five private passenger and three commercial) of the state’s 11.5 million-plus registered vehicles were insured through the plan, making it the smallest plan in the country. The table above provides OAIP private passenger vehicle activity for the last nine years. (Click here for auto plan statistics by state for 1998.)

OAIP eligibility requirements include a valid drivers license and a car in safe operating condition. In the plan, each insurance company operating in Ohio is assigned applications in proportion to its auto insurance premium volume.

OAIP private passenger vehicle coverages include bodily injury liability, property damage liability, uninsured/underinsured motorists, uninsured motorists property damage, medical payments, and comprehensive and collision with deductibles. The plan guarantees liability coverage, with most qualifying for additional coverages as well.

Premiums in the involuntary residual market start about 50% above the base rates for drivers in the voluntary market. The worse the driving record, the higher the rates.

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