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Assigned Risk: What It Is, How It Works

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

What Is Assigned Risk?

Assigned risk is when an insurance company is required, by state insurance law, to provide coverage for risk that may not find coverage in the general insurance marketplace. In order to compensate insurers for the potential losses associated with such mandated coverage, insurers will often pool funds and share the assigned risk.

Common examples include mandating that all drivers obtain car insurance or requiring businesses to purchase workers' compensation insurance.

Key Takeaways

• Assigned risk is when the law mandates that an insurance company offer certain coverages.
• In such cases, regulators will require insurance companies to pool together and accept the assigned risk, even if the insurers individually don’t want to provide a commercial policy.
• Assigned risk allows the state to protect drivers who are able to purchase commercial policies and who may be involved in an accident with a risky driver.

Understanding Assigned Risk

In most cases, insurance companies choose who they underwrite insurance policies for, and this choice to insure is based on the risk profile of the individual or business applying for coverage. These considerations include the likelihood that a claim that results in a loss for the insurance company. The insurer will thus price the cost of the policy it underwrites according to the potential severity of any losses. If a potential insured is deemed too risky, the insurer may not underwrite a new policy.

State insurance regulators recognize that insurers only want to underwrite policies that will be profitable, but also recognize that it is in the interest of the government that coverage is extended to groups that need protection but may not be able to obtain it in the general insurance market. To do this the regulator will require insurance companies that provide a particular line of insurance, such as workers’ compensation or automotive insurance, to participate in a state-sponsored plan that provides coverage.

Example: Motorist Coverage

For example, drivers are required to carry insurance with them in order to legally operate an automobile. This insurance is designed to cover claims made against the driver. In most cases, the driver’s record is in good shape, and insurers are likely to provide coverage.

Some drivers, however, have poor driving records and may not be able to obtain coverage because they present too much of a risk. Insurance regulators will require insurance companies to pool together and accept the assigned risk, even if the insurers don’t want to provide a commercial policy . This allows the state to protect drivers who are able to purchase commercial policies and who may be involved in an accident with a risky driver.

"In some cases, you can apply to an automobile insurance plan or assigned risk plan by directly contacting your state's Department of Insurance," according to the website DMV.org, a private, non-governmental website:

Some states require that you apply to several car insurance companies before you apply for the state's car insurance plan. If each provider has denied you car insurance coverage, you'll be accepted into the plan. Typically, your signature on the application is enough to acknowledge that you have fulfilled this requirement.

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assigned risk

Definition of assigned risk

Examples of assigned risk in a sentence.

These examples are programmatically compiled from various online sources to illustrate current usage of the word 'assigned risk.' Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback about these examples.

Word History

1940, in the meaning defined above

Dictionary Entries Near assigned risk

assignation

Cite this Entry

“Assigned risk.” Merriam-Webster.com Dictionary , Merriam-Webster, https://www.merriam-webster.com/dictionary/assigned%20risk. Accessed 3 Dec. 2023.

Legal Definition

Legal definition of assigned risk.

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• assigned risk

a risk that, under state law, is assigned to an insurer from a pool of insurers who would not otherwise accept it.

Origin of assigned risk

Words nearby assigned risk.

• assignation
• assigned counsel
• assigned sex
• assimilable

Dictionary.com Unabridged Based on the Random House Unabridged Dictionary, © Random House, Inc. 2023

assigned risk

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Assigned risk is a method of providing certain types of insurance to those who otherwise would be denied coverage because they would be considered too high-risk. Individuals who have failed to gain coverage through the private market–also called voluntary market–can apply to receive insurance through their state’s assigned risk “pool.” The state will assign the person to an insurance company within the pool, who must accept and insure that person. 

Companies who sell vehicle and workers’ compensation insurance are required to participate in assigned risk programs in the states that have them. However, while assigned risk programs allow people to gain necessary coverage for those activities, the rates gained through these programs are much higher than policies purchased through the private market. Further, most assigned risk plans offer only limited coverage, guaranteeing only the minimum required by law. If a person has no option but to purchase an assigned risk plan, they can try to remedy whatever made them undesirable to insurance companies and apply for a plan on the private market at a later date.

In the context of automobile insurance, a driver might need an assigned risk plan for multiple reasons. Common reasons drivers might be denied on the private market are numerous vehicular infractions or incidents, such as traffic tickets, speeding tickets, or recent accidents. Forty-one states have driver’s license point systems , and in some of these states insurance companies will reject drivers that accumulate too many points. Other reasons might be the inexperience of the driver, poor insurance record or credit, or if the person lives in a high-crime area.

New or very small companies might struggle to purchase a workers’ compensation plan on the private market. More established companies with a history of losses might also be deemed undesirable to insurance companies. Insurers are also reluctant to cover companies whose operations are particularly hazardous. Not every state requires workers’ compensation insurance, but for ones that do, assigned risk plans might be available for such companies. 

[Last updated in June of 2021 by the Wex Definitions Team ] 

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Definition of 'assigned risk'

Assigned risk in american english, examples of 'assigned risk' in a sentence assigned risk, browse alphabetically assigned risk.

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Assigned Risk

What is assigned risk.

Assigned risk workers’ compensation is designed to ensure that coverage is available to anyone who requires it, even those risks who are not accepted in the voluntary, or standard, market. Some employers may be considered high risk and are limited to the assigned risk business insurance market for reasons such as:

• They have no employees or a very small workforce
• They are a new company with little or no loss history
• They have had higher losses than expected in the past
• Their employees work in hazardous work conditions

Assigned Risk Solutions’ goal is to help employers in the Assigned Risk Plan get into the voluntary market, where there is more flexibility for the employer. By building up your loss history or reducing your losses, you better your chances of being accepted by a voluntary insurer.

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Assigned risk

Solving tough workers comp challenges.

For businesses unable to secure workers compensation coverage in the traditional marketplace, assigned risk insurance from Liberty Mutual can help. We offer this vital service in more than 26 states, providing workers compensation solutions to customers that may not qualify for coverage in the standard marketplace.

A protective partnership

• Solutions for complex risks
• Services that deliver

Our teams can provide solutions to help you navigate the residual market, protect your employees, and control your workers compensation costs through:

• Underwriters who know the assigned risk market across any number of industries, then dig in to understand case-by-case challenges and goals
• Risk control professionals who understand industry-specific loss drivers and focus on solutions to help improve workplace safety and mitigate injury and illness
• A full-time team of premium auditors, who verify that premiums over time accurately reflect the risks, coverages, and exposures we projected
• Claims professionals who advocate for injured workers and strive to deliver positive outcomes on claims

We understand that issues arise, and we have the financial strength and stability to work through unexpected losses with our customers.

We’re committed to a better experience for assigned risk customers and offer the following services and resources:

• A dedicated Assigned Risk Customer Service Center , available by phone or email
• Online access to pay bills, report claims, and more through our secure portal
• Risk control materials and training on the latest safety research, OSHA compliance information, and self-assessment tools available online or by phone
• Provider network information , including online access to local medical providers
• Premium audit reporting online or by mail

Get in touch

Assigned risk customer service center.

Monday through Friday 7 a.m. to 7 p.m. (CT)

Assigned risk customer portal

Access our secure portal to pay bills, report and manage claims, download claims forms and notices, and access risk control resources and training.

Assigned risk customer service

Access key contact information for assigned risk services teams, including payments, premium audit, and our Risk Control Consulting Center.

Assigned risk FAQs

Find answers to common questions about assigned risk policies.

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Learn more about our fully online premium audit program.

Questions about our eAudit process? Find answers to common questions regarding eAudit.

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This website is intended to be informational. Descriptions are provided only as a summary outline of the products and services available and are not intended to be comprehensive and do not constitute an offer to sell or a solicitation. The products and services described may not be available in all states or jurisdictions. See your policy, service contract, or program documentation for actual terms, conditions, and exclusions. Any inquiries regarding the subject matter set forth herein should be directed through licensed insurance professionals.

Coverage and insurance are provided and underwritten by Liberty Mutual Insurance Company or its affiliates or subsidiaries. When we offer insurance products, we will state clearly which insurer will underwrite the policy. Some policies may be placed with a surplus lines insurer. Surplus lines insurers generally do not participate in state guaranty funds and coverage may only be obtained through duly licensed surplus lines brokers.

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