Compulsory insurance
Insurance that the law requires in order to carry on an activity or own an asset, motor liability, construction, regulated professions, access to which is guaranteed by the Central Pricing Bureau and guarantee funds.
The legislature makes insurance compulsory when it considers that an activity exposes third parties to damage the person responsible could not repair alone. French law has several dozen such obligations, the best known being motor liability, introduced in 1958, ten-year construction liability and damage-to-works insurance, from the 1978 law, and the liability of many regulated professions: doctors, lawyers, notaries, insurance intermediaries, real estate agents. The obligation falls on the insured, but it creates a symmetric difficulty: an insured judged a bad risk may find no insurer. The system answers with two mechanisms. The Central Pricing Bureau sets, at the request of a person who has been refused, the premium at which an insurer of its choice must cover it. And guarantee funds compensate victims when the obligation was not met or the person responsible is unknown. For the underwriter, a compulsory line is a captive but regulated market, where it cannot permanently refuse a risk and where pricing is monitored, which profoundly changes its economics.
Textbook case: a young driver with two at-fault claims is refused motor insurance by five insurers. He applies to the Central Pricing Bureau, which sets a premium and deductible at which the insurer he named must cover him, so that he can drive legally and any victims will be compensated.
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