Assigned Risk Law and Legal Definition

Assigned risk is defined as “a danger or hazard of loss or injury that an insurer will not normally accept for coverage under a policy issued by the insurer, but that the insurance company is required by state law to offer protection against by participating in a pool of insurers who are also compelled to provide coverage.” Assigned Risk systems are also used for Workers' Compensation. Insurance companies are reluctant to provide coverage to employees performing inherently dangerous functions. In this regard, businesses who have had unsatisfactory loss performance or whose employees perform such hazardous functions that voluntary insurance companies will not insure them, are assigned to an insurer.

Some states' assigned risk plans only provide coverage for that particular state, causing businesses whose employees travel to other states to face issues like the possibility of an uncovered claim from an employee claiming another state's benefits. If there is no voluntary policy providing multiple state coverage, such parties can purchase a separate state's Worker's Compensation fund or NCCI assigned risk to fill the coverage gap. However, premium for such coverage may be higher than any voluntary policy.