Residual Market

What Does Residual Market Mean?

The residual market is a segment of the auto insurance market that provides coverage to drivers deemed high risk and denied by traditional insurers. In this market, the risk of insuring these drivers is distributed among the licensed insurers within the state.

Also referred to as the non-voluntary or shared market, state insurance regulators assign drivers to insurers, rather than insurers choosing to insure them voluntarily.

Insuranceopedia Explains Residual Market

Residual market policies are assigned to insurers in proportion to their market share. This means that a company with a larger share of the state’s policies is required to accept more high-risk motorists compared to smaller companies.

Several factors can lead drivers to seek auto insurance from the residual market. A key factor is the driver’s history, including past tickets, accidents, and claims. Drivers with multiple driving convictions, such as driving under the influence, may also struggle to find an insurer willing to provide them with a policy.