CAARP Introduction, Part I: What is CAARP?


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The CALIFORNIA AUTOMOBILE ASSIGNED RISK PLAN (CAARP) was created in 1947 by the state legislature with the essential purpose to provide automobile liability insurance to those who "in good faith" are entitled to but are unable to procure such insurance through ordinary methods. The statute indicates a legislative intent to encourage drivers to seek insurance in the voluntary market using the assigned risk Plan only as a "last resort".

What is CAARP?
It is a processing center by which people who have trouble buying automobile insurance are put in touch with an insurance company which will insure them. From then on, the person and the certified producer communicate with the insurance company as if they had chosen the company. As part of the initial processing, the Plan makes financial responsibility filings with the Department of Motor Vehicles if requested on the application.

CAARP has two risk types:

Private Passenger Auto (includes non-owned private passenger risks)
Commercial Auto (CAIP)

The Assigned Risk Plan is not an insurance company. Its rates are recommended by CAARP's Advisory Committee and approved by the Department of Insurance. It is the Advisory Committee's obligation to propose rates and run the Plan on a self-sustaining basis. The financial backing necessary to assume the risk comes from companies who are required by law to participate in the Plan.

Applicants to the Plan are divided among these insurance companies in proportion to the amount of automobile insurance business each company writes in the state. For example, a company, which insures 10 percent of the cars in California's regular market, insures 10 percent of the applicants to the assigned risk Plan. The insurer is only required to keep the risk for 3 years and then non-renew the risk. If the risk is still eligible for the Plan after the 3-year period the agent must then complete a new application and the insured gets assigned to a new company. CAARP ensures that each company meets these obligations.

CAARP is available to:

All residents of California and to non-residents of the state only with respect to vehicles registered in the state.
Non-residents of the state who are members of the United States military forces and are stationed in California.

CAARP is administered by AIPSO.

AIPSO is a not for profit organization funded by the insurance industry to support state automobile assigned risk plans.
The CAARP staff are employees of AIPSO so all of their salaries and expenses are paid by the insurance industry.
AIPSO contracts with each state's Department of Insurance to manage their automobile assigned risk plan.
AIPSO currently manages 46 of the 50 states from their home office in Johnston, Rhode Island.

Western Regional Office of AIPSO:

Includes 12 western states
CAARP is the California Assigned Risk Plan
WAAIP (Western Association of Automobile Insurance Plans) is comprised of 11 western states that combined to form an association of assigned risk plans.
The Western Regional office is located in San Francisco, CA.

California Low Cost Automobile Insurance Program (LCA)
CAARP is also the administrator of the California Low Cost Automobile Insurance Program (LCA). The LCA Program was created in 1999 to provide low-income good drivers with access to affordable liability automobile insurance. LCA policies are issued by California licensed insurance companies. The Program is not subsidized or otherwise supported by government funding.

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation.
The authors, LunchTimeCE, Inc. and AIPSO, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.