CAARP Introduction, Part IV: Commercial Auto


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What is CAIP?

As we discussed in the Introductory Courses, CAARP is the plan of last resort, basically meaning that if there is a place in the voluntary market for a risk, that is where it should go. However, for those who cannot find a voluntary market that will accept them the plan is available. In the case of private passenger assigned risk the applications are assigned randomly amongst all insurance companies that write auto liability insurance in the state. They receive the application assigned by the plan and issue the policy and it becomes part of their book of business.

Each insurance company has a quota based on their voluntary auto written premiums in the state compared to the total statewide voluntary auto written premiums. This quota or % is how the plan distributes the applications to them. Each insurance company in the state is required to fulfill their "quota" requirements as set forth in the California Insurance Code §11620.

When it comes to the commercial assigned risk program in CAARP it is handled differently. In the early 1980's all commercial assigned risk business had the same assignment procedure as private passenger assignments. However as the commercial assigned risk business began to grow, many of the small commercial companies did not have the expertise on staff to handle the large commercial type risk coming through the assigned risk plan. The plan was receiving the large long haul truckers and many public auto risks such as taxis and buses. Several of the larger commercial companies who could handle them with expertise were not always getting them due to the random assignment process, thus resulting in problems with companies processing the risk differently. Due to this nationwide issue the CAIP was developed to minimize the issues and problems.

The commercial program in CAARP is called CAIP (Commercial Automobile Insurance Procedure). It is a pooling mechanism whereby all commercial companies writing in the state participate. However rather than making direct assignments to them the plan contracts with two servicing carriers to handle all the commercial business.

Each of the servicing carries received 50% of the application received by the Plan. They are paid a fee by CAARP and all of the profits and losses of the program are shared by the commercial writers in the state.

The servicing carriers must reapply every 5 years. The CAARP Advisory Committee conducts a selection process, every 5 years from all the applicants that apply. Only 2 are selected, with the Commissioners final approval, to fill the 5-year contracts.

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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.