What is the "residual market" in insurance?

The "residual market" in insurance serves a vital purpose by providing coverage for individuals and businesses that are unable to secure insurance in the standard market due to various reasons such as high risk, poor claims history, or other underwriting challenges. This market acts as a safety net ensuring that all entities, regardless of their risk profiles, have access to essential insurance coverage.

The residual market may include programs like state-run insurance pools or assigned risk plans, which are strategically designed to distribute the risks of insuring those who are considered higher risk among all insurance carriers operating within a particular jurisdiction. This helps maintain stability in the overall insurance market by ensuring that even those who are deemed uninsurable in the traditional market have an option for obtaining coverage.

Understanding the purpose of the residual market is crucial for agents and brokers, as it informs their approach to clients who might be struggling to find coverage and highlights the importance of educating clients about available opportunities to seek insurance protection despite their unique circumstances.