Auto Insurance Markets
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 8.7 million drivers and their vehicles
are eligible for coverage through insurance companies, thus making
it one of the most favorable private passenger auto insurance markets
in the country. According to a 2001 study by the National Association
of Insurance Commissioners, Ohio’s 1999 auto insurance premiums
were nearly $137 less than the national average, with auto premiums
lower than all but 10 states (see "1999
US Auto Insurance Premiums by State").
Due to the competitive nature of writing voluntary standard insurance
within the state, it’s advisable to compare the services and
rates of various companies and agencies prior to purchasing insurance.
According to the Ohio Department of Insurance, there are 972 P/C
insurance companies licensed in Ohio. A.M. Best reports that 628
companies were licensed to write auto insurance in Ohio in 2000.
Only Illinois has more licensed auto insurance writers. Ohio’s
total direct premiums written for all auto lines ranked ninth in
the US for 2000.
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 specialized vehicles such as high-powered
sports cars and custom-built vehicles.
Four out of every five drivers fall into the standard or preferred
auto insurance market.
In recent years, the lines between standard and nonstandard markets,
and various levels of risk, have begun to blur. High risk drivers
are finding it easier to secure coverage through insurance companies
rather than reverting to state-run pools, because many insurers
also offer insurance specifically geared toward the nonstandard
market through separate subsidiaries and/or risk categories. There
are also small specialty insurers whose only business is the nonstandard
market.
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 nearly quintupled to $21.3
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. The chart at the bottom
of the facing page shows the nonstandard market in comparison to
the total direct premiums written for the private passenger market
for 1995–2000.
This growth is now contracting in part due to an increase in loss
costs, including medical, reinsurance and less depopulation of involuntary
state pools. A.M. Best data for 2000 shows that direct premiums
written for nonstandard auto lines is down from 1999. In 2000, direct
premiums written for nonstandard auto insurers totaled about $24.3
billion, compared to about $33.4 billion in 1999. The 2000 figure
represents about 20.2% of the auto insurance market, based on premium
volume.
Most nonstandard auto insurers use independent agents as their
distribution method, although the Internet and toll-free numbers
are distribution methods also employed by insurers.
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 2.4 million of the nearly 154
million insured private passenger cars in the US were insured through
the involuntary market in 1999 or about 1.54%. This is down from
2.1% of all insured private passenger vehicles insured through state
plans in 1998.
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 statistics show that only 11 passenger
vehicles (five private passenger and six commercial) of the state’s
11.7 million-plus registered vehicles were assigned to the plan
in 2000, making it the smallest plan in the country. The table above
provides OAIP private passenger vehicle activity for 1995–2000.
(Click here for auto plan statistics
by state for 1999.)
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.
1 Figure includes all vehicle registrations in Ohio
Sources: Ohio Automobile Insurance Plan and Ohio Department of Public
Safety
1 Before reinsurance transactions, excluding state
funds
2 Includes premium data from specialty companies whose total business
is nonstandard and nonstandard business from one other insurer
Sources: A.M. Best, Inc. and Insurance Information Institute Fact
Book 2002
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In 2000, some 140 insurance companies
specialized in the nonstandard auto insurance market. The top
five insurance groups, according to A.M. Best, Inc., command
more than 60% of the nonstandard market segment’s premiums. |
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