Definition - What does Residual Market mean?
The residual market is a segment of the auto insurance market that serves drivers who are considered high risk and are denied coverage by insurers. The residual market works by spreading the risk of insuring these drivers among the licensed insurers within the state.
It is also known as the non-voluntary or shared market because state insurance regulators assign drivers to insurers, rather than insurers voluntarily choosing to insure them.
Insuranceopedia explains Residual Market
Residual market policies are assigned to insurers based on their market share. If a particular insurance company writes a large percentage of the policies in the state, they will be obligated to accept more high-risk motorists than smaller companies.
There are many factors that result in drivers needing to acquire auto insurance from the residual market. One is the driver's history, including their history of driving tickets, accidents, and claims. Individuals with a number of convictions for driving offenses, such as driving under the influence, may also have difficulty finding an insurer who will willingly issue them a policy.