Excluded Driver Surcharge

[sankykid]

I've noticed that some companies in Arizona surcharge for an excluded driver on personal auto policies. Is this common in Arizona? In other states? Any other thoughts or comments about surcharging an excluded driver?

Thanks.

[pdxagentgal]

It is not uncommon in AZ or even other states. Most of my companies that even offer an exclusion will surcharge for it.

[mica.cooper]

I have worked with a lot of insurance companies in various states. The one time I saw something like this, I reported it to the department of insurance and they promptly spanked the company for a applying a non-filed surcharge ($2500).

This is charging for a non-coverage. How can a company charge for not taking a risk on? It violates the quid pro quo of insurance law that says in order to charge for something you must provide something in return. The company is providing no coverage and thereby has no risk and no premium should be collected for it. I would say contact your state insurance department and ask about it.

[plins]

But the exclusion form only excludes them from coverage if they're driving a listed car. There are many situations where a household member could still be eligible for coverage when they're not driving a listed car, especially if it's a dependent household member.

[mica.cooper]

You are correct, there are two types of exclusions:

1) Excluding a driver from the policy and all coverage. An example would be a person who has had their license taken away or has no license. There should be no charge for this as no coverage is provided.

2) Excluding a driver from a vehicle but not the policy. An example would be a youth from driving a surcharge vehicle such as Dad's 2011 Corvette. There may be a charge for this as there may be other vehicles upon which the youth may be rated.

[pdxagentgal]

Mica, I tend to disagree. I can think of a few that have a surcharge for adding a Named Driver Exclusion. It is an endorsement to the policy. And it's not being charged a premium per se, but a fee or surcharge. I doubt that none of these insurance companies filed with the states' DOIs to do so.

[sankykid]

As I understand it, Arizona law requires insurers to provide minimum liability coverage for all "household members" that reside with the named insured, even if that "household member" is excluded from the policy.

I'm thinking that companies in Arizona surcharge for the exclusion because they are still on the hook for the minimum. At least this way they capture some premium for their (limited) exposure.

Alternatively, if a company does not allow driver exclusions, as some don't, they are getting the 'true' premium for their exposure (provided the insured doesn't lie).

I'm not sure how this works in other states, but any feedback would be greatly appreciated.

[gagal]

These surcharges should have been filed & approved by the insurance companies. All of our excluded driver surcharges are filed in the states that allow them. If the state doesn't allow them, then we can't apply the surcharge.

[mica.cooper]

SankyKid,

I would be VERY surprised if this were the case. I don't know of any DOI or legislature that would 'punish' a driver for being a member of a household. Imagine a scenario where there is a large household of 10 drivers, each with a different company insurance. If the insured's policy were $400 for 6 months, and the surcharge for excluded driver liability $100, this would make the poor saps policy jump to $1300 for 6 months.

I would also be surprised because why would they force a driver, to carry minimum liability on other household members, when they probably already carry their own coverage, resulting in forced double coverage.