LAD/AIP Business 101

Companies that write personal auto business in the state are subject to being “assigned” their proportionate share of the personal auto policies in the state's Automobile Insurance Plan (AIP). The amount of assignments a company receives is based on its share of the personal auto market two years ago. Regardless of the drivers' histories or risk factors, the company is required to insure them under the Plan regulations, and at rates set by the State.

For example:

• Company X writes 10% of the auto policies in New York and is assigned its proportionate share of the total policies (actually based on premium) in the Plan.
• In this example, the company would get 100 out of each 1,000 assigned risk policies from the Plan.
• The company receives their assignments daily and processes them similar to their other voluntary auto business, but into a separate system with plan rates and policy forms. However, some companies decide that they would rather not do this very specialized assigned risk processing, and enter into a contract to have that business assigned to (and processed by) another insurance company.

Limited Assignment Distribution (LAD) occurs when insurance companies that have been assigned certain auto insurance business by the state's Automobile Insurance Plan transfer the business to another company. That other company is known as a LAD Servicing Carrier and the company transferring the assignments is known as an Excused Carrier. The LAD company will charge a fee to the Excused Carrier to handle the AIP business and will be responsible for collecting premiums, handling claims and administrative functions, and paying out losses.